EX-4.2 INDENTURE OF TRUST

Exhibit 4.2

$5,630,000

City of Chaska, Minnesota

Variable Rate Demand Purchase Revenue Bonds

(Lifecore Biomedical, Inc. Project)

Series 2004

INDENTURE OF TRUST

Dated as of August 1, 2004

Between

CITY OF CHASKA, MINNESOTA

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

This instrument was drafted by:

Dorsey & Whitney LLP

Suite 1500

50 South Sixth Street

Minneapolis, Minnesota 55402-1498

TABLE OF CONTENTS

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

i

ii

iii

INDENTURE OF TRUST

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

W I T N E S S E T H

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

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

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

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

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

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

GRANTING CLAUSE FIRST

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

GRANTING CLAUSE SECOND

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

GRANTING CLAUSE THIRD

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

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

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

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

2

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

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

ARTICLE I

DEFINITIONS

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

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

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

     “Authorized Borrower Representative” means Borrower Representative.

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

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

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

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

3

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4

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

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

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

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

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

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

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

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

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

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

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

5

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

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

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

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

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

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

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

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

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

     “Loan Agreement” means the Agreement.

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

     “Original Purchaser” means Northland Securities, Inc.

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

6

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

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

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

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

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

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

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

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

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

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

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

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

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

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

7

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

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

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

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

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

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

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

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

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

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

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

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

8

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

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

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

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

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

     “Series 2004 Bonds” means the Bonds.

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

     “State” means the State of Minnesota.

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

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

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

9

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

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

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

[The balance of this page intentionally left blank]

10

ARTICLE II

THE BONDS

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

     Section 2.02. Issuance of Bonds.

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

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

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

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

     (i) 10.00% per annum, or

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

11

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

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

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

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

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

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

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

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

12

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

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

     Section 2.04. Authentication.

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

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

13

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

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

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

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

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

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

14

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

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

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

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

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

15

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

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

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

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

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

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

16

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

[The balance of this page intentionally left blank]

17

ARTICLE III

REDEMPTION OF BONDS BEFORE MATURITY

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

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

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

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

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

18

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

*Final Maturity

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

19

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

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

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

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

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

     Section 3.07. Partial Redemption of Bonds.

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

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

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

20

ARTICLE IV

CONVERSION OF INTEREST RATE; DEMAND

PURCHASE OPTION

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

     1. The Optional Conversion Date.

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

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

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

21

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

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

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

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

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

     Section 4.03. [Intentionally Omitted].

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

22

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

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

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

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

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

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

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

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

     Section 4.08. Delivery of Purchased Bonds.

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

23

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

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

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

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

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

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

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

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

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

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

24

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

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

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

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

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

25

ARTICLE V

GENERAL COVENANTS

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

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

     Section 5.02. Performance of Covenants. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture and in the Agreement, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining hereto. The Issuer covenants that it is duly authorized under the Constitution and laws of the State, including particularly and without limi