Equipment Lease

EQUIPMENT LEASE


This Equipment Lease (the "Lease"), effective as of this 26th day of January, 2001, is by and between Stokes Canning Company, a Colorado corporation ("Lessor"), and Hoopeston Foods Denver Corp., a Delaware corporation ("Lessee").


WHEREAS, concurrent with the execution of this Lease, Lessor and Lessee are entering into (i) a Lease Agreement (the "Real Property Lease") for Lessee to lease Lessor's plant and real property located at 5590 High Street, Denver, Colorado (the "Plant"), and (ii) certain other agreements listed on Schedule 1 hereto (the Real Property Lease and the other agreements listed on Schedule 1 are collectively referred to as the "Other Agreements");


WHEREAS, the Lessor has certain equipment and personal property located at the Plant and described on Exhibit A, attached hereto and incorporated herein (collectively, the "Equipment");


WHEREAS, the Lessor is indebted to Wells Fargo Credit, Inc. ("Lender") under the terms of that certain Credit and Security Agreement, dated as of July 27, 1999, entered into between Lessor and Lender (the "Loan Agreement"). To secure Lessor's obligations to Lender under the Loan Agreement, Lessor has granted Lender a security interest in, among other things, Lessor's interest in personal property, including without limitation, the Equipment;


WHEREAS, in connection with the transactions under the Other Agreements and pursuant to all of the terms and conditions set forth herein, Lessee desires to lease the Equipment from Lessor, and Lessor desires to lease the Equipment to Lessee;


NOW, THEREFORE, in consideration of the mutual agreements set forth herein and in the Other Agreements, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. LEASE. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the Equipment described on Exhibit A hereto; subject to the prior lien of Lender. The parties acknowledge that, in the event of an Event of Default under the Loan Agreement (as defined therein), and for so long as the Lessor remains indebted to Lender, Lender may exercise all of its rights and remedies, including without limitation, its right to repossess and foreclose on the Equipment and terminate this Lease, and its purchase option rights granted to Lessee (collectively, "Lender's Rights"). Upon payment in full of the Lessor's Obligations to Lender (as defined in the Loan Agreement), Lender agrees to release its liens on its Collateral, including the Equipment. Nothing contained in the Lease shall be construed to relieve Lessor of its obligations to Lender under the terms of the Loan Agreement. In the event that Lender exercises its rights against its Collateral, (i) nothing herein shall be construed to waive, release or otherwise modify any claims or rights that Lessor or Lessee might assert against each other and (ii) Lessor shall remain fully liable to Lessee for all of Lessor's obligations under this Lease.


1 2. COMMENCEMENT AND TERMINATION. This Lease shall commence as of the date first set forth above (the "Commencement Date") and shall continue thereafter and terminate on the date that is the later of (i) 5 years after the Commencement Date and (ii) the expiration or termination of the Co-Pack and Warehousing Agreement between the parties hereto (such term is referred to herein as the "Lease Term").


3. PAYMENTS. The consideration for the lease of the Equipment is the obligations of the Lessee under this Agreement and the Other Agreements. Lessee shall pay all sales, use, excise, personal property, stamp, documentary, and ad valorem taxes, licenses and registration fees, assessments, fines, penalties, and other charges imposed on the ownership, possession or use of the Equipment during the term of this Lease, and Lessee shall pay all taxes (except income taxes imposed on Lessor) with respect to the payment hereunder, and shall, with the next scheduled payment, reimburse Lessor for any taxes paid in advance by Lessor. Lessee's obligation to pay such taxes, fees, assessments, fines, penalties, and other charges shall survive termination of the Lease. All payments under this Lease shall be made to Lessor at the address set forth above or at any other address Lessor subsequently gives to Lessee for purposes of making payment. In the event of default, payments made under the Lease may be applied to Lessee's obligation to Lessor in any order Lessor chooses.


4. EQUIPMENT AND DISCLAIMER OF WARRANTIES. LESSEE ACKNOWLEDGES THAT ALL OF THE EQUIPMENT IS USED AND IS BEING LEASED TO LESSEE HEREUNDER ON AN AS, IS BASIS AND WITH ALL DEFECTS AND FAULTS. LESSEE HAS FULLY INSPECTED THE EQUIPMENT AND IS SATISFIED THAT THE EQUIPMENT IS ACCEPTABLE AND SATISFACTORY IN ALL RESPECTS. LESSOR MAKES NO REPRESENTATIONS AND DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED, CONCERNING THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY. LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT) IT MIGHT HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE EQUIPMENT. Provided Lessee is not in default of this Lease or the Other Agreements, and subject to Lender's Rights, Lessor hereby assigns to Lessee and Lessee shall have the benefit of, any and all manufacturer's warranties and service agreements, if any, with respect to the Equipment; provided, however that Lessee's sole remedy for breach of any such warranty or service agreement shall be against the manufacturer of such Equipment and not against the Lessor, nor shall such breach have any effect whatsoever on the rights and obligations of Lessor or Lessee hereunder. Any defect, damage or other problem with the Equipment shall be the sole responsibility of Lessee and Lessee shall not assert any claim or offset against Lessor or amounts payable by Lessee hereunder.


5. AMENDMENTS; FACSIMILE COPIES. No term or provision of this Lease may be amended, altered, waived, discharged or terminated except by written instrument signed


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by the parties hereto. Lessee agrees and acknowledges that facsimile copies of the Lease and all other agreements, instruments and documents executed by Lessee in connection herewith (collectively the "Documents") may be admitted in any litigation or other proceeding concerning this Lease to the same extent as the original thereof. Lessee waives any objection to the admissibility of facsimile copies of the Lease or Documents.


6. LESSEE INDEMNIFICATION. Lessee hereby agrees to indemnify and hold Lessor and Lessor's agents and employees, harmless from any and all liability, damage, or loss, including attorneys' fees and court costs, arising out of the possession, operation, control, use, maintenance, or delivery of the Equipment.


7. POWER OF ATTORNEY/FINANCING STATEMENTS. Lessee hereby makes, constitutes and appoints Lessor and its assigns its true and lawful attorney and agent for it and in its name, place and stead to execute, deliver and file any UCC financing statements and other documents that Lessor deems necessary or advisable in order to protect Lessor's rights in the Equipment. This power being coupled with an interest shall be irrevocable for the term of the Lease. Lessor and Lessee agree that a carbon, photographic or other reproduction of the Lease may be filed as a financing statement under the UCC.


8. LOCATION AND INSPECTION. The Equipment shall be kept at the Plant at all times during the Lease Term, and Lessee shall not remove or allow such Equipment to be removed therefrom without Lessor's prior written consent except in the ordinary course of maintaining the Equipment. Any and all costs incurred by Lessor as a result of such relocation shall be borne by Lessee. Any charges hereunder shall not abate during the period the Equipment is out of service due to any such relocation requested by Lessee. Lessee shall permit Lessor on its premises to inspect the Equipment and the business records of Lessee relating to it during normal business hours.


9. USE OF EQUIPMENT. Lessee shall, at its expense, use, maintain and keep the Equipment in good operating order in the manner for which it was designed and intended, solely for Lessee's business purpose, in ac ...