pack And Warehousing Agreement

CO-PACK AND WAREHOUSING AGREEMENT


THIS CO-PACK AND WAREHOUSING AGREEMENT (this "AGREEMENT") is made and entered into this 26th day of January 2001, by and between HOOPESTON FOODS DENVER CORP. ("HFDC"), a Delaware corporation and STOKES CANNING COMPANY ("STOKES"), a Colorado corporation.


WITNESSETH


WHEREAS, STOKES, and its affiliates, are in the business of marketing and distributing a variety of canned food products; and


WHEREAS, pursuant to various agreements between HFDC and STOKES set forth on Schedule 1 hereto (the "Other Agreements"), HFDC has leased and now operates the Denver, Colorado processing plant owned by STOKES (the "DENVER FACILITY"); and


WHEREAS, HFDC desires to produce and package for STOKES a variety of canned food products (the "PRODUCTS") as described in Exhibit A, attached hereto and incorporated herein, and STOKES is willing to purchase the Products from HFDC in accordance with the terms and conditions of this Agreement; and


WHEREAS, STOKES desires that HFDC warehouse the Products produced hereunder on the terms and conditions of this Agreement.


NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein, the parties hereto agree as follows:


1. Manufacture and Packaging of Products.


(a) Products. HFDC shall produce and package the Products for STOKES pursuant to the terms and conditions of this Agreement. In the event that the parties hereto agree in writing that a product other than the Products shall be produced and packaged by HFDC for STOKES, then such other product(s) shall be deemed to be a Product for the purposes of this Agreement.


(b) Manufacture and Packaging of Products. HFDC shall produce, package and label the products in accordance with the terms and conditions of this Agreement and an annual pack plan, and shall comply with the specifications set forth in Exhibit A, unless otherwise agreed to by both parties. An Annual pack plan shall be negotiated and agreed to by the parties for each Contract Year, as defined herein, during the term of this Agreement.


(c) Production. HFDC warrants and guarantees that the Products manufactured by HFDC hereunder shall comply with all federal and state pure food laws and regulations, as


amended, and that the Products shall not be adulterated within the meaning
of the Federal Food, Drug and Cosmetic Act (the "FEDERAL ACT") or any
similar statute, and will not be an article which may not, under the
provisions of Section 404 of the Federal Act, be introduced into interstate
commerce. HFDC shall not use any food additive in the Products, as defined
in the Federal Act, unless STOKES has approved its use and the United
States Food & Drug Administration or the United States Department of
Agriculture, has either exempted it from the food additive requirements of
the Federal Act or prescribed the conditions under which it may be safely
used, in which case the prescribed conditions shall be complied with.


(d) Raw Materials. HFDC shall supply all the raw materials and
packaging materials necessary to manufacture and package the Products as
outlined in Exhibit B, attached hereto and incorporated herein.


(e) Labels. STOKES shall supply the labels necessary to package the
products and shall be solely responsible for assuring that the labels
required to package the Products are delivered to the Denver Facility in a
timely manner.


(f) Compliance With Law. In connection with the manufacture and
warehousing of the Products, packaging and raw materials, HFDC shall comply
with all applicable local, county, state and federal laws, codes and
ordinances of any description, including without limitation, all laws
regarding occupational health or safety issues, labor laws, product safety
laws, fire codes and hazardous waste or toxic substances management,
handling or disposal laws, and HFDC shall forthwith remedy any breach of
such laws in a customary manner. Without limiting the generality of the
foregoing, HFDC shall comply with all applicable laws, codes and ordinances
regarding environmental protection or pollution control, including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended, and HFDC shall
forthwith remedy any breach of such law in a customary manner.


2. Term. This Agreement shall commence on January 26, 2001 and shall have an initial term of five (5) years, until January 26, 2006, unless terminated earlier pursuant to Section 17. On June 30 of each year commencing June 30, 2001, the term of this Agreement shall be extended for one additional year, without action by either party, unless prior to June 30 of each year during the term hereof either party gives written notice that it will not agree to any additional extensions of the term. In the event of such notice, the term of this Agreement shall then be fixed and not be subject to any further additional automatic extensions. Each twelve (12) month period during the term of this Agreement shall be referred to herein as a "CONTRACT YEAR".


3. Prices and Terms.


(a) STOKES shall pay the prices specified on Exhibit C attached
hereto and incorporated herein for the Products manufactured and packaged
by HFDC hereunder, which prices shall represent the cost of HFDC for
manufacturing and labeling the Products as set forth in Exhibit C and shall
be based initially on the historic cost of STOKES as set forth in Exhibit C
to manufacture and package such Products, plus a fixed rate per case as
margin


2 The prices set forth in Exhibit C shall be reviewed after the completion of the first full Contract Year, and thereafter, shall be reviewed annually only to take into account any changes in the cost of items listed in Exhibit C. Notwithstanding the foregoing, the prices charged by HFDC to STOKES hereunder shall in no event exceed the lowest prices offered by HFDC to any of its other customers for comparable products.


(b) HFDC shall invoice STOKES upon the labeling of the Products and STOKES shall pay such invoices to HFDC within thirty (30) days from the date of such invoices. For each Contract Year during the term of this Agreement, beginning on January 26, 2001, if STOKES does not purchase Products aggregating 585,053 12-pack (15 oz.) equivalent cases during each Contract Year, STOKES shall pay HFDC, on or before the thirtieth (30th) day following the end of such Contract Year, the amount set forth in Exhibit C as fixed manufacturing expense/fixed warehousing expenses (FME/FWE) multiplied by the difference between 585,053 12-pack (15 oz.) equivalent cases and the actual number of cases purchased by STOKES from HFDC during such Contract Year.


(c) No later than May 1st preceding the beginning of each Contract Year, STOKES shall specify to HFDC the estimated annual quantities by stock keeping unit ("SKU") required for brite and labeled products that HFDC will manufacture, process and package during such Contract Year. On or before August 1st, preceding each Contract Year, STOKES shall specify the actual quantities by SKU that HFDC will manufacture, process and package during such Contract Year (the "REQUIRED VOLUME"). The notices provided under this paragraph are for planning purposes only and are not binding on the parties and shall not effect the minimum volume requirements contained in paragraph 3(b) above.


(d) STOKES shall prepare a Monthly Production Plan (the "PRODUCTION PLAN") setting forth HFDC's total production requirements for a three-month period. Based on the Production Plan, HFDC and STOKES shall use their best efforts to prepare a proposed thirteen (13) week production schedule. Based on this thirteen (13) week production schedule, STOKES and HFDC will use their best efforts to establish firm two (2) week production schedules.


(e) HFDC shall provide such written reports as are reasonably requested by STOKES, in a form reasonably acceptable to STOKES, on actual production and amounts and location of brite and finished product and packaging inventories on a monthly basis or as otherwise requested by STOKES.


(f) HFDC shall maintain and retain accurate records of production, shipment, rejected Raw Materials and rejected Product, as well as other records required to be kept by applicable local, state or federal law or as may be reasonably requested by STOKES. Such records shall be available to STOKES for copying and audit verification at any time during HFDC's regular business hours and shall be retained by HFDC for STOKES' use for at least two (2) years after completion of production.


3
(g) HFDC shall cause John Steele to devote sufficient time to HFDC
to properly run and manage the business of HFDC and perform all of HFDC
obligations under this Agreement and the Other Agreement.


4. Manufacture. HFDC shall manufacture and package the Products in accordance with the production schedule specified in the ...