UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2000

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to
                               -----------------    -----------------

                         Commission file number 0-19263


                            SUPREMA SPECIALTIES, INC.
                          (Exact Name of Registrant as
                            specified in its charter)


         New York                                            11-2662625
-------------------------------                    -----------------------------
(State or other jurisdiction of                          (I.R.S.  Employer
incorporation or organization)                           Identification No.)


                              510 EAST 35TH STREET
                           PATERSON, NEW JERSEY 07543
                     ---------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)


                                 (973) 684-2900
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No

As of February 12, 2001 there were 5,622,193  outstanding shares of the issuer's
Common Stock, $.01 par value.



SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets as of December 31, 2000 (unaudited) and June 30, 2000 3 Consolidated Statements of Earnings For The Three and Six Month Periods Ended December 31, 2000 and 1999 (unaudited) 4 Consolidated Statements of Cash Flows For the Six Month Periods Ended December 31, 2000 and 1999 (unaudited) 5 Notes to Consolidated Financial 6 Statements ITEM 2. Management's Discussion and Analysis of 8 Financial Condition and Results of Operations PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 11 Signatures 12

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> December 31, June 30, 2000 2000 ------------- ------------- (Unaudited) <S> <C> <C> ASSETS CURRENT ASSETS: Cash $ 300,981 $ 950,121 Accounts receivable, net of allowances of $770,290 at Dec. 31, 2000 and $770,290 at June 30, 2000 78,329,806 62,326,908 Inventories 62,471,633 51,630,343 Prepaid expenses and other current assets 905,864 755,067 Deferred income taxes 89,000 89,000 ------------- ------------- Total current assets 142,097,284 115,751,439 PROPERTY AND EQUIPMENT, NET 9,508,366 7,181,208 OTHER ASSETS 2,006,132 2,027,069 ------------- ------------- $ 153,611,782 $ 124,959,716 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 16,928,427 $ 13,989,065 Current portion of long-term obligations 572,573 609,690 Mortgage payable - short term 55,711 53,574 Income taxes payable 1,430,869 1,539,000 Accrued expenses and other current liabilities 2,358,095 3,743,917 ------------- ------------- Total current liabilities 21,345,675 19,935,246 DEFERRED INCOME TAXES 749,000 749,000 REVOLVING CREDIT LOAN 79,905,262 65,887,000 SUBORDINATED DEBT 10,500,000 10,500,000 LONG-TERM CAPITAL LEASES 845,656 1,105,637 MORTGAGE PAYABLE - LONG TERM 786,690 814,920 OTHER LIABILITIES 1,482,143 -- ------------- ------------- 115,614,426 98,991,803 STOCKHOLDERS' EQUITY: Redeemable, convertible preferred stock, $.01 par value, 2,500,000 shares authorized, none issued and outstanding at December 31, 2000 and June 30, 2000, respectively Common stock, $.01 par value, 10,000,000 -- -- Shares authorized, 5,835,563 and 4,655,564 Issued and outstanding at December 31, 2000 And June 30, 2000 58,355 46,555 Additional paid-in capital 19,327,812 11,365,207 Retained earnings 20,053,809 15,998,771 Treasury stock at cost, 213,370 at December 31, 2000 and June 30, 2000 (1,442,620) (1,442,620) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 37,997,356 25,967,913 ------------- ------------- $ 153,611,782 $ 124,959,716 ============= ============= </TABLE> See notes to consolidated financial statements. 3

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended December 31, December 31, ----------------------------- ------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------- ------------- <S> <C> <C> <C> <C> Net sales $ 92,741,847 $ 65,323,099 $ 181,689,372 $ 126,704,215 Cost of sales 78,373,061 54,152,094 153,292,479 105,549,409 ------------ ------------ ------------- ------------- Gross margin 14,368,786 11,171,005 28,396,893 21,154,806 ------------ ------------ ------------- ------------- Expenses: Selling and shipping 6,739,945 5,485,953 13,576,240 10,609,190 General and administrative 1,870,612 1,679,736 3,489,713 2,927,201 ------------ ------------ ------------- ------------- 8,610,557 7,165,689 17,065,953 13,536,391 ------------ ------------ ------------- ------------- Income from operations 5,758,229 4,005,316 11,330,940 7,618,415 Other income (expense) Interest expense, net (2,423,930) (1,418,290) (4,685,902) (2,677,980) ------------ ------------ ------------- ------------- (2,423,930) (1,418,290) (4,685,902) (2,677,980) ------------ ------------ ------------- ------------- Earnings Before Income Taxes 3,334,299 2,587,026 6,645,038 4,940,435 Income Taxes 1,266,000 1,083,000 2,590,000 2,023,000 ------------ ------------ ------------- ------------- Net earnings $ 2,068,299 $ 1,504,026 $ 4,055,038 $ 2,917,435 ============ ============ ============= ============= EARNINGS PER SHARE OF COMMON STOCK: Basic earnings per share $0.37 $0.34 $0.78 $0.66 ============ ============ ============= ============= Diluted earnings per share $0.33 $0.29 $0.69 $0.57 ============ ============ ============= ============= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 5,622,194 4,399,620 5,221,877 4,440,197 Diluted 6,256,840 5,100,196 5,910,461 5,143,589 ============ ============ ============= ============= </TABLE> See notes to consolidated financial statements. 4

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) <TABLE> <CAPTION> Six Months Ended December 31, ------------------------------------ 2000 1999 ------------ ------------ <S> <C> <C> CASH FLOW FROM OPERATING ACTIVITIES: Net Earnings $ 4,055,038 $ 2,917,435 Adjustments to reconcile net earnings to net cash Used in operating activities: Depreciation and amortization 323,744 301,385 Provision for doubtful accounts -- -- Changes in operating assets and liabilities: Accounts receivable (16,002,898) (12,699,068) Inventories (10,841,290) (5,796,658) Prepaid expenses and other current assets (150,797) (339,826) Other assets 20,937 460,960 Accounts payable 2,939,362 4,299,429 Income taxes payable (108,131) (433,223) Accrued expenses and other current liabilities (1,385,822) (439,380) ------------ ------------ Other liabilities 1,482,143 -- ------------ ------------ Net cash used in operating activities (19,667,714) (11,728,946) ------------ ------------ CASH FLOW FROM INVESTING ACTIVITIES: Payments for purchase of property and equipment (2,650,902) (587,197) ------------ ------------ Net cash used in investing activities (2,650,902) (587,197) ------------ ------------ CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from revolving credit loan 36,868,262 42,415,000 Principal payments of revolving credit loan (22,850,000) (28,741,599) Principal payments of capital leases (297,098) (268,386) Principal payments of mortgage (26,093) (15,992) Proceeds from secondary public offering (net) 7,974,405 -- Proceeds from options -- 53,619 Acquisition of treasury stock -- (1,046,250) Net cash provided by financing activities 21,669,476 12,396,392 ------------ ------------ NET INCREASE (DECREASE) IN CASH (649,140) 80,249 CASH, BEGINNING OF PERIOD 950,121 358,214 ------------ ------------ CASH, END OF PERIOD $ 300,981 $ 438,463 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the period for: Interest $ 4,423,702 $ 2,649,326 ============ ============ Income Taxes $ 2,698,131 $ 2,457,411 ============ ============ </TABLE> See notes to consolidated financial statements. 5

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL INFORMATION The unaudited consolidated balance sheet as of December 31, 2000, the unaudited consolidated statements of earnings for the three and six month periods ended December 31, 2000 and 1999 and the unaudited consolidated statements of cash flows for the six month periods ended December 31, 2000 and 1999 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The balance sheet for June 30, 2000 is derived from audited financial statements. In the opinion of management, all adjustments (which include normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows at December 31, 2000 and for the three and six month periods presented, have been included. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from this quarterly financial statement. The attached financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company's 2000 Annual Report on Form 10-K for the year ended June 30, 2000. The results of operations and cash flows for the three and six months ended December 31, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year. 2. INVENTORIES Inventories are summarized as follows: Dec. 31, 2000 June 30, 2000 ------------- ------------- Finished goods $46,495,520 $38,430,322 Raw materials 14,492,910 11,872,836 Packaging 1,483,203 1,327,185 ----------- ----------- $62,471,633 $51,630,343 =========== =========== 3. LONG-TERM REVOLVING CREDIT LOAN We have a bank revolving credit facility (the "Facility") that, in December 2000, was amended and increased the bank's potential commitment to $111,000,000. The commitment for the Facility is through February 15, 2004. The rate of interest on amounts borrowed under the Facility is the adjusted LIBOR rate, as defined, plus 175 basis points. The Facility is collateralized by substantially all existing and acquired assets as defined in the credit facility, and is guaranteed by our subsidiaries, Suprema Specialties West, Inc., Suprema Specialties Northeast, Inc., and Suprema Specialties Northwest, Inc. and the pledge of all of the stock of these subsidiaries. Advances under the Facility are limited to 85% of eligible accounts receivable and 60% of all inventory except packaging material, as defined in the agreement. The Facility Agreement contains restrictive financial covenants, including the maintenance of consolidated net worth, and the maintenance of leverage and fixed charge ratios, as defined in the agreement, and a restriction on dividends to common shareholders. As of December 31, 2000, we were in compliance with the covenants under the Facility Agreement. Borrowings under the Facility are required to be used for working capital purposes. 4. ISSUANCE OF COMMON STOCK In August 2000, we completed an underwritten secondary public offering of shares of our common stock of which 1,100,000 shares were sold by us and 100,000 shares 6

were sold by certain selling shareholders at a public offering price of $8.00 per share. Gross proceeds of the shares sold by us was $8,800,000 and net proceeds paid to us was $7,404,000. We received no proceeds from the shares sold by the selling shareholders. In addition, in association with the secondary public offering, the underwriters were granted an option to purchase up to an additional 80,000 shares of common stock from us and 100,000 shares of common stock from the selling shareholders to cover over-allotments. On September 15, 2000 the underwriters exercised the over-allotment option. Gross proceeds of the over-allotment shares sold by us was $640,000 and net proceeds to us was $570,000. We received no proceeds from the shares sold by the selling shareholders. 5. EARNINGS PER SHARE Basic and diluted earnings per share for the three and six month periods ended December 31, 2000 and December 31, 1999 are calculated as follows: <TABLE> <CAPTION> Three months ended Dec. 31, 2000 Three months ended Dec. 31, 1999 ---------------------------------- ---------------------------------- Net Income Shares Per Share Net Income Shares Per Share <S> <C> <C> <C> <C> <C> <C> Basic earnings per share $2,068,299 5,622,194 $.37 $1,504,026 4,399,620 $.34 Effect of assumed conversion of warrants and employee stock options 634,646 700,576 ---------- --------- ---- ---------- --------- ---- Diluted earnings Per share $2,068,299 6,256,840 $.33 $1,504,026 5,100,196 $.29 <CAPTION> Six months ended Dec. 31, 2000 Six months ended Dec. 31, 1999 ---------------------------------- ---------------------------------- Net Income Shares Per Share Net Income Shares Per Share <S> <C> <C> <C> <C> <C> <C> Basic earnings Per share $4,055,038 5,221,877 $.78 $2,917,435 4,440,197 $.66 Effect of assumed conversion of warrants and employee stock options 688,584 703,392 ---------- --------- ---- ---------- --------- ---- Diluted earnings Per share $4,055,038 5,910,461 $.69 $2,917,435 5,143,589 $.57 </TABLE> 6. TREASURY STOCK During the six months ended December 31, 1999, we, in accordance with our stock repurchase plan, purchased 135,000 shares of our common stock at a cost of $1,046,250. 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this report contains statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important known and unknown risks and uncertainties that could significantly affect our actual results, performance or achievements in the future and, accordingly, such actual results, performance or achievements may materially differ from those expressed or implied in any forward-looking statements made by or on behalf of us. These risks and uncertainties include, but are not limited to, those relating to our growth strategy, customer concentration, outstanding indebtedness, seasonality, expansion and other activities of competitors, changes in federal or state laws and the administration of such laws, protection of trademarks and other proprietary rights, and the general condition of the economy and its effect on the securities markets and other risks detailed in our other filings with the Securities and Exchange Commission. The words "believe," "expect," "anticipate," "intend," and "plan," and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date the statement was made. Results of Operations - Three months ended December 31, 2000 vs. Three months ended December 31, 1999. Net sales for the three month period ended December 31, 2000 were approximately $92,742,000, as compared to approximately $65,323,000 for the three months ended December 31, 1999, an increase of approximately $27,419,000 or 42.0%. This increase reflects an increase in sales volume for food service products manufactured by us, partially offset by the lower average selling price for cheese (as a result of the lower CME Block Cheddar Market, the commodity index on which bulk cheese prices are based). Our gross margin increased by approximately $3,198,000 from approximately $11,171,000 in the three month period ended December 31, 1999 to approximately $14,369,000 in the three month period ended December 31, 2000, primarily as a result of an increase in the sales volume for food service products manufactured by us. Our gross margin as a percentage of sales decreased to 15.5% in the three month period ended December 31, 2000 from 17.1% in the three month period ended December 31, 1999. The decrease in gross margin as a percentage of sales was primarily due to the lower average selling price for cheese (as a result of the lower average CME Block Cheddar Market, the commodity index on which bulk cheese prices are based) during the three months ended December 31, 2000, and, to a lesser extent, the shift toward lower margin sales associated with the food service markets, partially offset by the increase in sales volume. Selling and shipping expenses increased approximately $1,254,000 from approximately $5,486,000 for the three month period ended December 31, 1999 to approximately $6,740,000 for the three month period ended December 31, 2000. The increase in selling and shipping expenses is primarily due to increases in advertising and promotional allowances, commission expense and shipping expenses in support of our revenue growth. As a percentage of sales, selling and shipping expenses decreased from 8.4% in the three month period ended December 31, 1999 to 7.3% in the three month period ended December 31, 2000. The percentage decrease in selling and shipping expenses, which is primarily due to the increase in our revenue, was partially offset by the increases in advertising and promotional allowances, commission expense and shipping expenses in support of our revenue growth. General and administrative expenses increased by approximately $191,000 to approximately $1,871,000 for the three month period ended December 31, 2000 as compared to approximately $1,680,000 for the comparable period in 1999. The increase in general and administrative expenses is primarily due to an increase in personnel and other administrative expenses associated with our revenue growth. As a percentage of sales, general and administrative expenses decreased from 2.6% in the three month period ended December 31, 1999 to 2.0% in the three month period ended December 31, 2000. The percentage decrease in general and administrative expenses, which is primarily due to the increase in our revenue, was partially offset by the increases in personnel and other administrative expenses associated with the increase in our revenue. Net interest expense increased to approximately $2,424,000 for the three month period ended 8

December 31, 2000 from approximately $1,418,000 for the three month period ended December 31, 1999. The increase in interest expense was primarily due to our expanded borrowing requirements necessary for working capital needs. The provision for income taxes for the three month period ended December 31, 2000 increased by approximately $183,000 compared to the three month period ended December 31, 1999 as a result of increased taxable income. Net earnings increased approximately $564,000 to approximately $2,068,000 for the three month period ended December 31, 2000, from approximately $1,504,000 for the comparable period ended December 31, 1999 due to the increase in gross margin as a result of increased sales volumes, which was partially offset by the increases in selling and shipping expenses, general and administrative expenses and interest expense. Results of Operations - Six months ended December 31, 2000 vs. Six months ended December 31, 1999. Net sales for the six month period ended December 31, 2000 were approximately $181,689,000 as compared to approximately $126,704,000 for the six months ended December 31, 1999, an increase of approximately $54,985,000 or 43.4%. This increase reflects an increase primarily in sales volumes for food service products manufactured by us partially offset by the lower average selling price for cheese (as a result of the lower CME Block Cheddar Market, the commodity index on which bulk cheese prices are based). Our gross margin increased by approximately $7,242,000, from approximately $21,155,000 in the six month period ended December 31, 1999 to approximately $28,397,000 in the six month period ended December 31, 2000, primarily as a result of an increase in sales volume for food service products manufactured by us. Our gross margin as a percentage of sales decreased from 16.7% in the six months ended December 31, 1999 to 15.6% for the comparable six month period in 2000. The decrease in gross margin as a percentage of sales was primarily due to the lower average selling price for cheese (as a result of the lower average CME Block Cheddar Market, the commodity index on which bulk cheese prices are based) during the six months ended December 31, 2000, and, to a lesser extent, the shift toward lower margin sales associated with the food service markets, which was partially offset by the increase in the sales volume. Selling and shipping expenses increased by approximately $2,967,000 from approximately $10,609,000 for the six month period ended December 31, 1999 to approximately $13,576,000 for the six month period ended December 31, 2000. The increase in selling and shipping expenses is primarily due to increases in advertising and promotional allowances, commission expense and shipping expenses in support of our revenue growth. As a percentage of sales, selling and shipping expenses decreased from 8.4% in the six month period ended December 31, 1999 to 7.5% in the six month period ended December 31, 2000. The percentage decrease in selling and shipping expenses, which is primarily due to the increase in our revenue, was partially offset by the increases in advertising and promotional allowances, commission expense and shipping expenses in support of the increase in our revenue. General and administrative expenses increased by approximately $562,000 from approximately $2,927,000 for the six month period ended December 31, 1999 to approximately $3,490,000 for the comparable period in fiscal 2000. The increase in general and administrative expenses is primarily a result of an increase in personnel and other administrative expenses associated with our revenue growth. As a percentage of sales, general and administrative expenses decreased to 1.9% for the six month period ended December 31, 2000, from 2.3% for the comparable period in 1999, which is primarily due to the increase in our revenue, was partially offset by an increase in personnel and other administrative expenses. Net interest expense increased to approximately $4,686,000 for the six month period ended December 31, 2000 from approximately $2,678,000 for the six month period ended December 31, 1999. The increase was primarily the result of our expanded borrowing requirements necessary for working capital needs. The provision for income taxes for the six month period ended December 31, 2000, increased by approximately $567,000 as compared to the six month period ended December 31, 1999 primarily as a result of increased taxable income. Net earnings increased by approximately $1,138,000 to approximately $4,055,000 for the six 9

month period ended December 31, 2000, from approximately $2,917,000 for the comparable period ended December 31, 1999 due to the increase in gross margin primarily as a result of increased sales volumes, which was partially offset by the increases in selling and shipping expenses, general and administrative expenses and interest expense. Financial Position, Liquidity and Capital Resources At December 31, 2000, we had working capital of approximately $120,752,000, as compared with $95,816,000 at June 30, 2000, an increase of approximately $24,936,000. The increase in working capital is primarily due to the increase in accounts receivable and inventory levels in support of our increased sales volumes, as well as decreases in income taxes payable and accrued expenses and other current liabilities, partially offset by increases in accounts payable. In August 2000 we completed an underwritten secondary public offering of shares of our common stock of which 1,100,000 shares were sold by us and 100,000 shares were sold by certain selling shareholders at a public offering price of $8.00 per share. Gross proceeds of the shares sold by us was $8,800,000 and net proceeds paid to us was $7,404,000. We received no proceeds from the shares sold by the selling shareholders. In addition, in association with the secondary public offering, the underwriters were granted an option to purchase up to an additional 80,000 shares of common stock from us and 100,000 shares of common stock from the selling shareholders to cover over-allotments. On September 15, 2000 the underwriters exercised the over-allotment option. Gross proceeds of the over-allotment shares sold by us was $640,000 and net proceeds to us was $570,000. We received no proceeds from the shares sold by the selling shareholders. In March, 1996, we purchased our Paterson, New Jersey production facility which we previously had leased. The purchase was financed through a mortgage on the property. Proceeds of the loan were $1,050,000, of which $686,250 was used to pay the remaining obligation to the landlord. The balance of the proceeds was used to complete the expansion of a 7,800 square foot refrigerated storage facility. The five year note which bore interest at 8.51% per annum was being amortized at a fifteen year rate and required a balloon payment at the end of year five of approximately $840,000. On March 29,1999, we refinanced the mortgage on our Paterson facility for the principal amount of $929,573. The seven year note which bears interest at 7.85% per annum is being amortized at a fifteen year rate and requires a balloon payment at the end of year seven of approximately $501,000. At December 31, 2000, we had outstanding obligations of approximately $842,401 under the mortgage financing the purchase of the Paterson facility. We have a bank revolving credit facility, (the "Facility"), that in December 2000 was amended and increased the bank's potential commitment to $111,000,000 through February 15, 2004. The rate of interest on amounts borrowed under the Facility is the LIBOR rate plus 175 basis points. The interest rate at December 31, 2000 was 8.44%. Advances under the Facility are limited to 85% of eligible accounts receivable, and 60% of most inventory. The agreement contains restrictive covenants, including the maintenance of consolidated net worth and the maintenance of leverage and fixed charge ratios as defined in the agreement, and restriction on dividends to common shareholders. As of December 31, 2000, we are in compliance with these covenants. At December 31, 2000 our total outstanding debt to the bank was $79,905,262. We previously entered into certain capital lease financing transactions to purchase equipment. At December 31, 2000, we had obligations of approximately $1,418,229 under capital leases. Management believes that with an increase in the Facility to $111,000,000, we have adequate working capital to meet our reasonably foreseeable cash requirements. Net cash used in operating activities in the six month period ended December 31, 2000 was approximately $19,668,000 as compared to $11,729,000 in the comparable period of the prior year. The use of cash in operations was primarily the result of increases in accounts receivable and inventories in support of our increased revenue growth, and decreases in income taxes payable and accrued expenses and other current liabilities partially offset by increases in accounts payable and other liabilities, and net earnings as adjusted for non-cash expenses. The cash used in operations was financed through cash flow from financing 10

activities. Net cash used in investing activities in the six month period ended December 31, 2000 was approximately $2,651,000, as compared to $587,000 in the six month period ended December 31, 1999, as a result of continued expenditures for fixed assets including the purchase from Snake River Cheese, L.L.C. of land and building located in Blackfoot, Idaho, and capital equipment utilized in our California and New York manufacturing facilities. In August 2000, we completed an underwritten secondary public offering of shares of our common stock of which 1,100,000 shares were sold by us and 100,000 shares were sold by certain selling shareholders at a public offering price of $8.00 per share. Gross proceeds of the shares sold by us was $8,800,000 and net proceeds paid to us was $7,404,000. We received no proceeds from the shares sold by the selling shareholders. In addition, in association with the secondary public offering, the underwriters were granted an option to purchase up to an additional 80,000 shares of common stock from us and 100,000 shares of common stock from the selling shareholders to cover over-allotments. On September 15, 2000 the underwriters exercised the over-allotment option. Gross proceeds of the over-allotment shares sold by us was $640,000 and net proceeds to us was $570,000. We received no proceeds from the shares sold by the selling shareholders. As a result of the foregoing, at December 31, 2000 we had cash of approximately $300,981. PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibits Exhibit 10.1 Amendment No. 2 to Third Amendment and Restated Revolving Loan, Guaranty and Security Agreement among Fleet Bank, N.A., Sovereign Bank, Mellon Bank, N.A., European American Bank, N.A., PNC Bank, N.A., National City Bank, Suprema Specialties, Inc., Suprema Specialties West, Inc., Suprema Specialties Northeast, Inc., and Suprema Specialties Northwest, Inc. Exhibit 10.2 Asset Purchase Agreement dated as of November 27, 2000 by and among Snake River Cheese, L.L.C. and Suprema Specialties Northwest, Inc. Exhibit 10.3 Master Lease Agreement dated December 28, 2000 by and between PNC Leasing and Suprema Specialties Northwest, Inc. and supplement. Reports on Form 8-K None 11

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPREMA SPECIALTIES, INC. ------------------------- (registrant) Date: February 12, 2001 By: /s/ Mark Cocchiola ------------------- --------------------------------- Mark Cocchiola President & Chief Executive Officer Date: February 12, 2001 By: /s/ Steven Venechanos ------------------ ------------------------------ Chief Financial Officer & Secretary 12


                                 AMENDMENT NO. 2

                                       to

            THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND
                               SECURITY AGREEMENT

                                      among

                           SUPREMA SPECIALTIES, INC.,


                         SUPREMA SPECIALTIES WEST, INC,


                      SUPREMA SPECIALTIES NORTHEAST, INC.,


                       SUPREMA SPECIALTIES NORTHWEST INC.,


                          THE BANKS SIGNATORY THERETO,


                  FLEET NATIONAL BANK, as Administrative Agent,

                      SOVEREIGN BANK, as Syndication Agent

                                       and

                    MELLON BANK, N.A., as Documentation Agent


                                   Arranged by

                             FLEET SECURITIES, INC.

                          Dated as of December 28, 2000




AMENDMENT NO. 2 to THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT This AMENDMENT NO. 2, dated as of December 28, 2000 (this "Amendment"), is by and among FLEET NATIONAL BANK (successor by merger to Fleet Bank, National Association and as successor to NatWest Bank N.A. and National Westminster Bank NJ, "Fleet"), SOVEREIGN BANK ("Sovereign"), MELLON BANK, N.A. ("Mellon"), EUROPEAN AMERICAN BANK ("EAB"), PNC BANK, NATIONAL ASSOCIATION ("PNC") and NATIONAL CITY BANK ("National City" and, together with Fleet, Sovereign, Mellon, EAB and PNC, the "Banks"), FLEET NATIONAL BANK, successor by merger to Fleet Bank, National Association, as administrative and collateral agent for the Banks (in such capacity, the "Agent"), SOVEREIGN BANK, as syndication agent for the Banks (in such capacity the "Syndication Agent"), MELLON BANK, N.A., as documentation agent for the Banks (in such capacity the "Documentation Agent"), SUPREMA SPECIALTIES, INC., a New York corporation (the "Borrower"), SUPREMA SPECIALTIES WEST, INC. ("Suprema West"), a California corporation, SUPREMA SPECIALTIES NORTHEAST, INC. ("Suprema Northeast"), a New York corporation and SUPREMA SPECIALTIES NORTHWEST INC. ("Suprema Northwest"), Delaware corporation (Suprema West, Suprema Northeast and Suprema Northwest are collectively referred to herein as the "Guarantor"). RECITALS: A. The Borrower, the Banks, the Agent and the Guarantor (other than Suprema Northwest) have entered into a Third Amended and Restated Revolving Loan, Guaranty and Security Agreement, dated as of September 23, 1999, as amended by an Amendment Number 1 and Assignment Agreement dated as of March 10, 2000 (as so amended, the "Loan Agreement"). B. The Borrower, the Guarantor, the Banks and the Agent wish to amend the Loan Agreement to permit an increase to the Commitment, to add Suprema Northwest as a Guarantor and to otherwise amend the Loan Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration whose receipt and sufficiency are acknowledged, the Borrower, the Guarantor, the Banks, the Agent, the Syndication Agent and the Documentation Agent agree as follows: 1

Section 1. Definitions. Each capitalized term used but not defined in this Amendment shall have the meaning ascribed to such term in the Loan Agreement. Section 2. Amendments of Loan Agreement. (a) The introductory paragraph of the Loan Agreement is amended to read in its entirety as follows: THIS THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT dated as of September 23, 1999, as amended by Amendment No. 1 and Assignment Agreement dated as of March 10, 2000 is by and among FLEET NATIONAL BANK (successor by merger to Fleet Bank, National Association, as successor to NatWest Bank N.A. and National Westminster Bank NJ, "Fleet"), having an office at 208 Harristown Road, Glen Rock, New Jersey 07452, SOVEREIGN BANK ("Sovereign"), having an office at 210 Smith Street, Perth Amboy, New Jersey 08861, MELLON BANK, N.A. ("Mellon"), having an office at 379 Thornall Street, Edison, New Jersey 08837, EUROPEAN AMERICAN BANK ("EAB"), having an office at 335 Madison Avenue, New York, New York 10017, PNC BANK, NATIONAL ASSOCIATION ("PNC"), having an office at 1 Garret Mountain Plaza, West Paterson, New Jersey 07424, NATIONAL CITY BANK ("National City") having an office at One South Broad Street, 13th Floor, Philadelphia, Pennsylvania 19107 (Fleet, Sovereign, Mellon, EAB, PNC and National City, together with any other financial institution that becomes a party hereto, are referred to herein individually as a "Bank" and collectively as the "Banks"), FLEET NATIONAL BANK, as administrative and collateral agent for the Banks hereunder (in such capacity, the "Agent"), having an office at 208 Harristown Road, Glen Rock, New Jersey 07452, SOVEREIGN BANK, as syndication agent for the Banks (in such capacity the "Syndication Agent") having an office at 210 Smith Street, Perth Amboy, New Jersey 08861, MELLON BANK, N.A., as documentation agent for the Banks (in such capacity the "Documentation Agent") having an office at 379 Thornall Street, Edison, New Jersey 08837, SUPREMA SPECIALTIES, INC. (the "Borrower"), a New York corporation with its principal place of business at 510 East 35th Street, Paterson, New Jersey 07543, SUPREMA SPECIALTIES WEST, INC. ("Suprema West"), a California corporation with its principal place of business at 14253 South Airport Way, Manteca, California 95336, SUPREMA SPECIALTIES NORTHEAST, INC. ("Suprema Northeast"), a New York corporation with its principal place of business at 30 Main Street, Ogdensburg, New York 13669 and SUPREMA SPECIALTIES NORTHWEST INC. ("Suprema Northwest"), a Delaware corporation with its principal place of business at 295 South Ash Street, Black Foot, Idaho (Suprema West, Suprema Northeast and Suprema Northwest are collectively referred to herein as the "Guarantor"). Capitalized terms used herein without definition shall have the meanings assigned to such terms in Section 1 hereof. (b) A new definition for "Amendment No. 2" shall be added to Section 1 of the Loan Agreement in its correct alphabetical order to read in its entirety as follows: "Amendment No. 2" means that certain Amendment No. 2 to this Agreement dated as of December 28, 2000 among the parties thereto. (c) The definition of "Capital Expenditures" contained in Section 1 of the Loan Agreement is amended to read in its entirety as follows: "Capital Expenditures" means, as to any Person, Capital Expenditures (Non-Operating Leases). 2

(d) The definition of "Capital Expenditures (Non-Operating Leases)" contained in Section 1 of the Loan Agreement is amended to read in its entirety as follows: "Capital Expenditures (Non-Operating Leases)" means, as to any Person, for any period, the sum of (a) expenditures for any fixed assets or improvements and replacements, substitutions or additions thereto which would be treated as capital expenditures in accordance with GAAP and (b) the portion of all payments with respect to each Capitalized Lease which are required to be capitalized on the balance sheet of the applicable lessee in accordance with GAAP. (e) The definition of "Commitment" contained in Section 1 of the Loan Agreement is amended to read in its entirety as follows: "Commitment" means for the period from and including the Closing to, but excluding, the Commitment Expiration Date, the commitment of the Banks to make Loans to the Borrower pursuant to this Agreement in an aggregate principal amount not to exceed at any time outstanding (i) $85,000,000 with respect to the period from the Closing to, but excluding, the Effective Date of Amendment No. 2 and (ii) $111,000,000 with respect to the period from the Effective Date of Amendment No. 2 to, but excluding, the Commitment Expiration Date, as such amounts may be increased pursuant to Section 2.1 and reduced pursuant to Section 5. (f) The definition of "Guarantor" contained in Section 1 of the Loan Agreement is amended to read in its entirety as follows: "Guarantor" means collectively Suprema Specialties West, Inc., Suprema Specialties Northeast, Inc. and Suprema Specialties Northwest Inc., jointly and severally. (g) A new definition for "Increase Supplement" shall be added to Section 1 of the Loan Agreement in its correct alphabetical order to read in its entirety as follows: "Increase Supplement" means an increase supplement substantially in the form of Exhibit A to Amendment No. 2. (h) The definition of "Notes" contained in Section 1 of the Loan Agreement is amended to read in its entirety as follows: "Notes" means those certain Secured Revolving Notes dated December 28, 2000 made by the Borrower in favor of each institution that was a Bank as of the date thereof, which Notes were given in substitution for certain notes dated March 10, 2000, but in each case not in cancellation, discharge or extinguishment of the indebtedness formerly evidenced by such notes, as amended from time to time, together with all promissory notes delivered in replacement or substitution thereof and any all notes made by the Borrower in favor of an institution that becomes a Bank after the Effective Date of Amendment No. 2. (i) A new definition for "Permitted Snake River Transaction" shall be added to Section 1 of the Loan Agreement in its correct alphabetical order to read in its entirety as follows: "Permitted Snake River Transaction" means the purchase by the Borrower or Suprema Northwest (the actual purchaser of such facility is referred to herein as the "Snake River Purchaser") from Snake River Cheese, LLC of the furniture, fixtures, equipment and real property 3

comprising a certain privately-owned, approximately 37,280 square foot turn-key cheese production facility located in Blackfoot, Idaho, for an aggregate consideration of not in excess of [$6,000,000], from which some or all of the property so purchased shall be sold by the Snake River Purchaser to a leasing company (or other financing entity) and then leased back to the Snake River Purchaser by such leasing company (or other financing entity) pursuant to a sale-leaseback arrangement; provided, that, with respect to such described transaction (the "Transaction"); each of the following conditions shall have been satisfied (i) neither the Borrower nor Suprema Northwest (if Suprema Northwest is such Snake River Purchaser) has incurred any additional Indebtedness to finance such acquisition (other than the sale-leaseback arrangement described above), whether in the form of seller notes, third party Indebtedness or otherwise; (ii) at the time of the Transaction no Default or Event of Default exists and no Default or Event of Default would occur after giving effect to such Transaction; (iii) the Borrower shall have delivered to the Agent, within five days of the execution thereof, but in no event less than 10 days prior to the consummation of such Transaction, copies of the purchase agreement and any other material documents executed in connection with the Transaction and each such document shall be in form and substance reasonably satisfactory to the Agent; (iv) the assets being acquired are being acquired free and clear of any and all Liens (other than Liens reasonably satisfactory to the Agent); (v) the Agent shall have received such other information or documents as it shall have reasonably requested in connection with such Transaction; (vi) the Transaction shall have been consummated in accordance with the definitive Transaction documents, without any waiver or amendment of any material term or condition therein not consented to by the Agent (acting with the consent of the Required Banks, if needed) and in compliance with all applicable laws and all necessary approvals, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect; (vii) all applicable environmental issues shall have been addressed in a manner reasonably satisfactory to the Agent and (viii) all governmental and third-party consents and approvals necessary in connection with each aspect of the Transaction shall have been obtained (without the imposition of any unreasonable conditions) and shall remain in effect, except where the failure to obtain same could not reasonably be expected to have a Material Adverse Effect; all applicable waiting periods shall have expired or been terminated or waived without any material adverse action being taken by any authority having jurisdiction; and no law or regulation shall be applicable that restrains, prevents or imposes material adverse conditions upon any aspect of the Transaction as reasonably determined by the Borrower. (j) Section 2.1 of the Loan Agreement is amended to read in its entirety as follows: 2.1 Commitment; Maximum Credit; Increases to Commitments. (a) Subject to the terms and conditions of this Agreement, each Bank severally (but not jointly) agrees to make loans to the Borrower (hereinafter collectively referred to as "Loans" and individually as a "Loan"), from time to time before the Termination Date, in such amounts as Borrower may from time to time request, not to exceed at any time outstanding the amount set opposite the Bank's name below; provided, that, pursuant to the terms of Section 2.1(b) the table set forth below is subject to revision upon written notice from the Agent consented to in writing by the Borrower (and upon the Agent's distribution of any such notice that includes a revised table, absent manifest error the table below shall be deemed amended and automatically revised as set forth in such notice); provided, however, that in no event shall the aggregate outstanding principal amount of Loans at any time outstanding exceed the lesser of (A) the Commitment, or (B) the Borrowing Base, each as in effect at the time of such Loan (the "Maximum Credit"): 4

Name of Bank Amount Fleet National Bank $ 30,000,000.00 Sovereign Bank $ 25,000,000.00 Mellon Bank, N.A. $ 22,500,000.00 National City Bank $ 15,000,000.00 PNC Bank, National Association $ 10,000,000.00 European American Bank $ 8,500,000.00 TOTAL $111,000,000.00 Each Loan shall be made by each Bank in the proportion which that Bank's Commitment bears to the total amount of all the Banks' Commitments; provided, however, that the failure of any Bank to make any requested Loan to be made by it on the date specified for such Loan shall not relieve each other Bank of its obligation (if any) to make such Loan on such date, but no Bank shall be responsible for the failure of any other Bank to make any Loan to be made by such other Bank. Subject to the terms hereof, the Borrower may borrow, prepay and reborrow, and may continue and convert any Loan in accordance with Section 2.5, until the Termination Date. The Banks have no obligation to make any Loan on or after the Termination Date. (b) Provided that no Default or Event of Default exists or would exist immediately before and after giving effect thereto, the Borrower may at any time and from time to time, at its sole cost and expense, request any one or more of the Banks to increase its Commitment (such decision to increase the Commitment of a Bank to be within the sole and absolute discretion of such Bank), or request any other institution reasonably satisfactory to the Agent to provide a new Commitment, by submitting an Increase Supplement, duly executed by the Borrower and each such increasing Bank or other institution agreeing to increase its Commitment or provide a new Commitment, as the case may be. If such Increase Supplement is in all respects reasonably satisfactory to the Agent, the Agent shall execute such Increase Supplement and deliver a copy thereof to the Borrower and each such increasing Bank or other institution, as the case may be. Upon execution and delivery of such Increase Supplement, (i) in the case of each such increasing Bank, such increasing Bank's Commitment shall be increased to the amount set forth in such Increase Supplement, (ii) in the case of each such other institution, such other institution shall become a party hereto and shall for all purposes of the Loan Documents be deemed a "Bank" with a Commitment in the amount set forth in such Increase Supplement, (iii) in each case, the Commitment of such increasing Bank or such other institution, as the case may be, shall be as set forth in the applicable Increase Supplement, and (iv) the Borrower shall contemporaneously therewith execute and deliver to the Agent (x) for each Bank providing an increased Commitment, a new Note in the amount of such increased Commitment in exchange for the return and cancellation of each such Bank's existing Note and (y) for each such other institution providing a new Commitment, a Note in the amount of its Commitment; provided, however, that: (i) immediately after giving effect thereto, the aggregate Commitment of all the Banks shall not be in excess of $125,000,000.00; (ii) unless otherwise agreed to by the Agent, each such increase shall be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof; 5

(iii) from the date hereof through the Commitment Expiration Date, the Commitment shall not be increased on more than two occasions; (iv) if Loans shall be outstanding immediately after giving effect to such increase, each Bank shall be deemed to have automatically assigned or assumed from each other Bank such rights, and shall have been deemed to have automatically assigned to or assumed from or delegated to such other Bank such obligations, in each case without recourse, representation or warranty, as shall cause the outstanding principal balance of its Loans to be an amount equal to its Percentage of the aggregate amount of all outstanding Loans (as used herein, a Bank's "Percentage" shall be determined by dividing the Commitment of such Bank as set forth in Section 2.1(a) of the Loan Agreement, by the total Commitment of all the Banks as set forth in such Section 2.1(a); provided, that, in each case (x) the table utilized with respect to such Section 2.1(a) shall be the revised table distributed by the Agent pursuant to this Section 2.1(b) , (y) the Commitment shall be the increased Commitment of all the Banks as provided by the Agent pursuant to this Section 2.1(b) and (z) the term "Banks" shall include all then existing Banks and any and all such "other institutions" that shall become Banks (as more fully described above)). Each such Bank shall make such payments to, and as directed by, the Agent and the Agent shall make such payments to the Banks in order to cause the outstanding principal balance of the Loans by each Bank to be an amount equal to its Percentage of the aggregate amount of all outstanding Loans after giving effect to the Commitment increase. The Borrower hereby agrees that (x) any amount that a Bank so pays to another Bank pursuant to this Section 2.1(b) shall be entitled to all rights of a Bank under this Agreement and such payments to Banks shall constitute Loans held by each such payor Bank under this Agreement, (y) that each such payor Bank may, to the fullest extent permitted by law, exercise all of its right of payment (including the right of set-off) with respect to such amounts as fully as if such payor Bank had initially advanced the Borrower the amount of such payments and (z) each Bank receiving payment of its Loans pursuant to this Section may treat the assignment of Eurodollar Loans as a prepayment of such Eurodollar Loans for purposes of Section 5.4 hereof. (v) each such other institution shall have delivered to the Agent and the Borrower all forms, if any, that are required to be delivered by such other institution pursuant to this Agreement; (vi) within two Business Days after the Agent executes and delivers each Increase Supplement in accordance with the terms hereof, the Agent shall revise the table set forth in Section 2.1(a) to reflect the adjustments to the Commitments contemplated by clause (iv) above and shall promptly send a copy thereof to the Banks and upon the Agent's distribution of same, the Commitment of each Bank shall be automatically adjusted to be the Commitment set forth therein; and (vii) the Borrower shall have paid to Fleet Securities, Inc., as arranger of the increase of the facility, an arrangement fee satisfactory to Fleet Securities, Inc. and the Borrower. In connection with any increase to the Commitment pursuant to this Section, the Borrower, the Guarantor, the Agent and each of the Banks hereby consents to the addition of each "other institution" as a new Bank as a Bank under this Agreement with a Commitment as set forth in Section 2.1(a) of this Agreement, as amended and updated by the Agent. 6

(k) Section 10.17 of the Loan Agreement is amended by adding the following phrase immediately to the end thereof immediately before the period: and (iii) the sale of property pursuant to the Permitted Snake River Transaction (l) Section 10.19(vi) of the Loan Agreement is amended to read in its entirety as follows: (vi) the Permitted Snake River Transaction and transactions permitted by Sections 10.16 and 10.21 hereof. (m) Section 10.20(v) of the Loan Agreement is amended by replacing the phrase "; provided, however, that in no event" with the phrase "; provided, however, that, excluding obligations in connection with Equipment Operating Leases, in no event". (n) The initial paragraph of Section 10.27 of the Loan Agreement (appearing prior to the table set forth in such Section 10.27) is amended to read in its entirety as follows: 10.27 Limitation on Capital Expenditures.Expend in the aggregate, for the Borrower and all Subsidiaries, in excess of the amount set forth opposite the Fiscal Year ending the date set forth below for Capital Expenditures including payments made on account of Capitalized Leases (but excluding, for the avoidance of doubt, payments made or to be made on account of Equipment Operating Lease Obligations), to be tested on a quarterly basis. For purposes of the foregoing, Capital Expenditures shall include equipment acquired under direct purchases, bank financing and payments made on account of any deferred purchase price or on account of any indebtedness incurred to finance any such purchase price: (o) A new Section 10.31 shall be added to the Loan Agreement immediately after Section 10.30 and shall read in its entirety as follows: 10.31 Margin Stock. Not use any portion of the proceeds of any Loan, in whole or in part, for the purpose of purchasing or carrying any "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System. (p) Section 15.1(i) of the Loan Agreement is amended to read in its entirety as follows: (i) change the Commitments of the Banks, except as permitted by Section 2.1 (which changes in Commitments shall only require the consent of a Bank that is increasing its Commitment and shall automatically apply to all other Banks; provided, that, changes to the dollar amounts in the second clause (i) in Section 2.1(b) shall require the approval of all Banks); (q) Section 15.2 of the Loan Agreement is amended to read in its entirety as follows: 15.2 WAIVER OF TRIAL BY JURY. THE BORROWER, GUARANTOR, AGENT AND THE BANKS (BY ACCEPTANCE OF THE NOTES) MUTUALLY HEREBY 7

KNOWINGLY, VOLUNTARILY AND INTENIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT AND/OR THE BANKS RELATING TO THE ADMINISTRATION OF THE LOANS AND/OR ANY OTHER CREDIT FACILITIES HEREUNDER OR THE ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWER AND GUARANTOR EACH HEREBY WAIVE ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER AND GUARANTOR EACH CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT AND/OR THE BANKS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT AND/OR THE BANKS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSITUTES A MATERIAL INDUCEMENT FOR THE AGENT AND THE BANKS TO ACCEPT THIS AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS AND TO EXTEND CREDIT TO THE BORROWER. (r) Section 15.3 of the Loan Agreement is amended to read in its entirety as follows: 15.3 Notices. Except as otherwise expressly provided herein, all notices hereunder shall be in writing and shall be delivered by telecopier, hand, overnight delivery or by mail. Notices given by mail shall be deemed to have been given three (3) days after the date sent if sent by registered or certified mail, postage prepaid, and: (i) if to the Borrower and/or the Guarantor, to: Suprema Specialties, Inc. 510 East 35th Street Paterson, New Jersey 07543 Attn: President (ii) if to the Agent or Fleet, to: Fleet National Bank 208 Harristown Road Glen Rock, New Jersey 07452 Attn: Edward J. Waterfield, Senior Vice President (iii) if to Sovereign, to: Sovereign Bank 210 Smith Street Perth Amboy 08861 Attn: Owen McKenna, Vice President 8

(iv) if to Mellon, to: Mellon Bank, N.A. 379 Thornall Street Edison, New Jersey 08837 Attn: Russ J. Lopinto, Vice President (v) if to EAB, to: European American Bank 335 Madison Avenue New York, New York 10017 Attn: George Stirling, Vice President (vi) if to PNC, to: PNC Bank, National Association 1 Garret Mountain Plaza West Paterson, New Jersey 07424 Attn: Judy Land, Vice President (vii) if to National City, to: National City Bank One South Broad Street 13th Floor Philadelphia, Pennsylvania 19107 Attn: Lyle Cunningham, Vice President or in the case of any party, such other address as such party may, by written notice, received by the Agent, have designated as its address for notices and in the case of any institution that became a Bank after the Effective Date of Amendment No. 2, such address as shall be designated on its assignment agreement or otherwise in writing to the Agent. Notices given by (i) telecopier shall be deemed to have been given when sent, (ii) hand shall be deemed to have been given the same day they have been sent and (iii) overnight delivery shall be deemed to have been given the day after they have sent, in each case if properly addressed to the party to whom sent, at its address, as aforesaid. The Agent shall be entitled to reasonably rely upon any telephonic notices purportedly given pursuant to the terms of this Agreement and the Borrower and the Guarantor shall hold the Agent harmless from any loss, cost or expense ensuing from any such reliance. (s) Section 15.7 of the Loan Agreement is amended by adding the phrase "(excluding the laws applicable to conflicts or choice of law)" immediately after the phrase "construed by the laws of the State of New Jersey". (t) Section 15.17 of the Loan Agreement is amended to read in its entirety as follows: 15.17 References in Other Loan Documents. The Borrower and Guarantor acknowledge and agree that any reference in any Loan Document to "the Agreement", or words of like import shall mean this Agreement, as amended from time to time, and any reference in any 9

Loan Document to the Notes, the Loans, or words of like import shall mean the Notes and the Loans as defined herein. (u) New Sections 15.19, 15.20 and 15.21 shall be added to the Loan Agreement immediately after Section 15.18 and shall read in their entirety as follows: 15.19 Payments. All payments under this Agreement and the Notes shall be applied first to the payment of all fees, expenses and other amounts due to the Banks (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal; provided, however, that after the occurrence of an Event of Default, payments will be applied to the obligations of the Borrower to the Banks as the Required Banks determine in their sole discretion. 15.20 Integration. This Agreement and the other Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced thereby. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superceded by this Agreement and such other Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in this Agreement or such other Loan Documents. 15.21 Name of Fleet. Any reference in this Agreement or any other Loan Document to Fleet Bank, National Association or Fleet Bank, N.A. shall be deemed to mean Fleet National Bank, successor by merger to Fleet Bank, National Association. Section 3. Reallocation of Commitments; Notes. (a) The total amount of each Bank's Commitment pursuant to the Loan Agreement shall be the amount set forth in Section 2.1 of the Loan Agreement, as amended by this Amendment. (b) All Loans of each Bank to the Borrower shall be evidenced by a Note of the Borrower substantially in the form of Exhibit A to the Loan Agreement (the "Note"), which Note shall amend and restate the existing Note payable to such Bank. (c) Upon the Effective Date, the Commitment of each Bank shall be automatically adjusted as set forth in this Amendment. Section 4. Conforming Amendments. The Loan Agreement, the Loan Documents and all agreements, instruments and documents executed and delivered in connection with any of the foregoing, shall each be deemed to be amended and supplemented hereby to the extent necessary, if any, to give effect to the provisions of this Amendment, and each Bank is authorized to annex a copy of this Amendment to its respective copy of the Loan Agreement. Except as so amended hereby, the Loan Agreement and the other Loan Documents shall remain in full force and effect in accordance with their respective terms. 10

Section 5. Acknowledgments, Confirmations and Consent. (a) The Borrower and the Guarantor each acknowledge and confirm that the Liens granted pursuant to the Loan Agreement secure the indebtedness, liabilities and obligations of the Borrower to the Banks and the Agent under the Notes as amended and restated pursuant to this Amendment, under the Loan Agreement as further amended by this Amendment and under the other Loan Documents, whether or not so stated in such Loan Agreement and/or other Loan Document, and that the term "Obligations" as used in the Loan Agreement (or any other terms used in the Loan Agreement to describe or refer to the indebtedness, liabilities and obligations of the Borrower to the Banks and the Agent) includes all other indebtedness, liabilities and obligations of the Borrower under the Loan Agreement as amended by this Amendment and under the amended and restated Notes executed in connection with this Amendment. (b) The Guarantor consents in all respects to the execution by the Borrower of this Amendment and acknowledges and confirms that the Guarantor continues to guarantee the full payment and performance of the indebtedness, liabilities and obligations of the Borrower under the Loan Agreement as further amended by this Amendment and under the amended and restated Notes executed in connection with this Amendment as provided in the Loan Agreement, and remain in full force and effect in accordance with their respective terms. Section 6. Representations and Warranties. The Borrower and the Guarantor, as the case may be, each represents and warrants to the Banks, the Agent, the Syndication Agent and the Documentation Agent as follows: (a) After giving effect to this Amendment (i) each of the representations and warranties set forth in Section 9 of the Loan Agreement is true and correct in all respects as if made on the date of this Amendment, except for changes in the ordinary course of business which, either singly or in the aggregate, are not materially adverse to the business or financial condition of the Borrower or the Guarantor, and (ii) no Default or Event of Default exists under the Loan Agreement. (b) Each of the Borrower and the Guarantor has the power to execute, deliver and perform, and has taken all necessary corporate action to authorize the execution, delivery and performance of, this Amendment and the other agreements, instruments and documents to be executed by it in connection with this Amendment. No consent or approval of any Person (except for such consents as have been obtained) and no consent, license, certificate of need, approval, authorization or declaration of, or filing with, any governmental authority, bureau or agency is or will be required in connection with the execution, delivery or performance by the Borrower or the Guarantor, or the validity or enforceability of this Amendment and the other agreements, instruments and documents executed in connection with this Amendment. (c) The execution, delivery and performance by the Borrower and the Guarantor of this Amendment and each of the agreements, instruments and documents executed in connection with this Amendment to which it is a party will not (i) violate any 11

provision of law, (ii) conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or the certificate of incorporation or by-laws of the Borrower or any Guarantor, (iii) create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which the Borrower or any Guarantor is a party or by which any of them is bound or any of their respective properties or assets is affected, or (iv) result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of the Borrower or any Guarantor, except for the Liens created and granted pursuant to the Loan Documents. (d) This Amendment and each of the other agreements, instruments and documents executed in connection with this Amendment to which the Borrower or the Guarantor is a party has been duly executed and delivered by the Borrower or the Guarantor, as the case may be, and constitutes the valid and legally binding obligation of the Borrower or the Guarantor, as the case may be, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion; provided, however, that such laws shall not materially interfere with the practical realization of the benefits of the Security Documents or the Liens created thereby, except for: (i) possible delay, (ii) situations which may arise under Chapter II of the U.S. Bankruptcy Code, II U.S.C. ss.ss. 10 1 et seq., and (iii) equitable orders of any United States Bankruptcy Court. (e) Since January 1, 2000, the Borrower has not repurchased any of its issued and outstanding capital stock. (f) To the extent the Borrower remains in compliance with the Borrowing Base, all obligations under the Loan Agreement, as further amended pursuant to the terms of this Amendment, constitute "Senior Debt" as defined in that certain Note Agreement dated as of March 9, 1998 with respect to $10,500,000 16.5% Senior Subordinated Notes Due March 1, 2006. Section 7. Fees and Expenses. The Borrower shall pay the following fees and expenses in connection with this Amendment: (a) The Borrower shall pay to each increasing Bank a fee in the amount of .25% of the amount of the increase, if any, in Bank's Commitment set forth in this Amendment from such Bank's Commitment set forth in Amendment No. 1, such fee to be payable upon execution of this Amendment. (b) The Borrower agrees to pay the Agent upon demand all reasonable expenses, including reasonable fees of attorneys and paralegals for the Agent, incurred by 12

the Agent in connection with the preparation, negotiation and execution of this Amendment and any agreements, instruments and documents executed or furnished in connection with this Amendment. Section 8. Miscellaneous. (a) Except as specifically amended by this Amendment, the Loan Agreement and each of the other agreements, instruments and documents executed in connection with the Loan Agreement shall remain in full force and effect in accordance with their respective terms. (b) THIS AMENDMENT AND ALL OTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW JERSEY BY RESIDENTS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). (c) The provisions of this Amendment are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause, provision or part in such jurisdiction and shall not in any manner affect such clause, provision or part in any other jurisdiction or any other clause or provision in this Amendment in any jurisdiction. (d) This Amendment may be signed in any number of counterparts with the same effect as if all parties to this Amendment signed the same counterpart. (e) This Amendment shall be binding upon and inure to the benefit of each of the Borrower and the Guarantor and their respective successors and to the benefit of the Agent, the Banks, the Syndication Agent and/or the Documentation Agent and their respective successors and assigns. The rights and obligations of each of the Borrower and the Guarantor under this Amendment shall not be assigned or delegated without the prior written consent of the Agent and the Banks, and any purported assignment or delegation without such consent shall be void. Section 9. Effectiveness of Amendment. This Amendment shall become effective (the "Effective Date") upon the later of (i) delivery from Borrower to each Bank of a Note in a face amount equal to such Bank's Commitment (as amended by this Amendment) which note shall amend and restate and be in replacement of and substitution for its existing promissory note (such amended and restated promissory note, when executed and delivered, shall be deemed one of the Notes for all purposes of the Agreement) and documents relating thereto, (ii) receipt by the Agent of counterparts of this Amendment duly signed by each party hereto, (iii) receipt by the Agent of a fully executed 13

copy of an Amendment to the Pledge Agreement in the form of Exhibit B to Amendment No. 2, (iv) receipt by the Agent of one or more certificates representing all the issued and outstanding shares of Suprema Northwest and an irrevocable power of attorney with respect to such shares in the form of Exhibit A to the Pledge Agreement, (v) the payment of the fees and expenses set forth in Section 7 of this Amendment, (vi) receipt by the Agent of corporate resolutions and certificates of good standing with respect to Borrower and Guarantor, (vii) receipt by the Agent of such other documents that it shall reasonably request, including without limitation duly executed Uniform Commercial Code financing statements with respect to all Collateral owned by Suprema Northwest, (vii) receipt by the Agent of evidence to the consummation of the Permitted Snake River Transaction and (ix) receipt by the Agent of an opinion of counsel to the Borrower and Guarantor substantially similar to the opinion of counsel provided in connection with Amendment No. 1. [Signature Pages Follow] 14

IN WITNESS WHEREOF, the Borrower, the Banks, the Agent, the Syndication Agent, the Documentation Agent and the Guarantor have signed and delivered this Amendment No. 2 as of the date first written above. SUPREMA SPECIALTIES, INC., as Borrower By /s/ Mark Cocchiola --------------------------------- Name: Mark Cocchiola Title: President Each of the guarantors indicated below hereby consents to this Amendment and reaffirms its continuing obligations under its guarantee as set forth in the Loan Agreement as amended hereby and all the documents, instruments and agreements executed pursuant thereto or in connection therewith, without offset, defense or counterclaim (any such offset, defense or counterclaim as may exist being hereby irrevocably waived by each such guarantor). SUPREMA SPECIALTIES WEST, INC., as a Guarantor By /s/ Mark Cocchiola --------------------------------- Name: Mark Cocchiola Title: President SUPREMA SPECIALTIES NORTHEAST, INC., as a Guarantor By /s/ Mark Cocchiola --------------------------------- Name: Mark Cocchiola Title: President SUPREMA SPECIALTIES NORTHWEST INC., as a Guarantor By /s/ Mark Cocchiola --------------------------------- Name: Mark Cocchiola Title: President 15

FLEET NATIONAL BANK, successor by merger to Fleet Bank, National Association, as Agent and as a Bank By /s/ Edward D. Harrington --------------------------------- Name: Edward D. Harrington Title: Vice President 16

SOVEREIGN BANK, as Syndication Agent and as a Bank By /s/ Owen P. McKenna --------------------------------- Name: Owen P. McKenna Title: Vice President 17

MELLON BANK, N.A., as Documentation Agent and as a Bank By /s/ Russ J. Lopinto --------------------------------- Name: Russ J. Lopinto Title: Vice President 18

EUROPEAN AMERICAN BANK, as a Bank By /s/ George L. Stirling --------------------------------- Name: George L. Stirling Title: Vice President 19

PNC BANK, NATIONAL ASSOCIATION, as a Bank By /s/ Richard Bishop --------------------------------- Name: Richard Bishop Title: Vice President 20

NATIONAL CITY BANK, as a Bank By /s/ Thomas J. McDonnell --------------------------------- Name: Thomas J. McDonnell Title: Senior Vice President 21

EXHIBIT A FORM OF INCREASE SUPPLEMENT 22

EXHIBIT B FORM OF AMENDMENT TO PLEDGE AGREEMENT 23

                            ASSETS PURCHASE AGREEMENT

     AGREEMENT, dated as of the 27th day of November 2000, by and among Snake
River Cheese, L.L.C., an Idaho limited liability company ("Seller"), and Suprema
Specialties Northwest Inc., a Delaware corporation ("Buyer").

                              W I T N E S S E T H:

     WHEREAS, Seller owns a cheese plant in the City of Blackfoot, Idaho (the
"Plant");

     WHEREAS, Beatrice Foods currently leases the Plant from Seller and operates
the Plant (the "Business"), which lease shall expire on November 30, 2000; and

     WHEREAS, Buyer desires to purchase from Seller substantially all of the
properties and assets comprising the Plant, including the Real Property (as
defined below), and Seller desires to sell such properties and assets to Buyer,
upon the terms and conditions herein contained;

     NOW, THEREFORE, in consideration of, and in reliance upon, the
representations, warranties, covenants and conditions herein contained, the
parties hereto hereby agree as follows:

     1. Certain Definitions and Rules of Construction.

          1.1 Certain Definitions. As used in this Agreement, the following
     terms have the respective meanings set forth below:

          "Affiliate" of any specified Person shall mean any other Person
     directly or indirectly controlling or controlled by or under direct or
     indirect common control with such specified Person. For the purposes of
     this definition, "control" when used with respect to any specified Person
     means the power to direct the management and policies of such Person,
     directly or indirectly, whether through the ownership of voting securities,
     by contract or otherwise.

          "Allocation Statement" shall have the meaning set forth in
     subparagraph 2.5.2 hereof.

          "Ancillary Agreements" shall mean the Buyer Ancillary Agreements and
     the Seller Ancillary Agreements.

          "Applicable Law" means, with respect to any Person, any common law or
     duty, case law or ruling, or any domestic or foreign, federal, state or
     local statute, law, ordinance, rule, administrative interpretation,
     regulation, order, writ, injunction, directive, judgment, decree or other
     requirement of any Governmental Authority which is applicable to such
     Person or its properties, assets or activities.


"Assumed Contracts" shall have the meaning set forth in subparagraph 4.10 hereof. "Assumed Liabilities" means only those liabilities of Seller listed on Schedule 2.3 and obligations relating to the Assumed Contracts included in the Purchased Assets. "Books and Records" shall mean originals or copies of all books, records, files and papers of Seller which are used or held for use in connection with the Business (or any portions thereof), whether in hard copy or computer format, including bank account records, books of account, invoices, sales and promotional materials, manuals, sales and purchase correspondence, employment records, and documentation declared or used for accounting, marketing, manufacturing. "Business" shall have the meaning set forth in the preamble. "Business Day" shall mean any day other than a Saturday, Sunday, federal holiday or day on which banks in the State of New York are required or permitted by law to be closed. "Buyer" shall have the meaning set forth in the preamble. "Buyer Ancillary Agreements" shall have the meaning set forth in subparagraph 3.3 hereof. "Cash Purchase Price" shall have the meaning set forth in subparagraph 2.5.1 hereof. "Claims" shall mean, except with respect to Taxes and any insurance policies of Seller, rights, claims, credits, causes of action or rights of set-off against third parties, whether liquidated or unliquidated, fixed or contingent, including rights under, or pursuant to, warranties, representations and guaranties made by suppliers, manufacturers, contractors or other third parties in connection with products or services purchased by or furnished to the Business, which are owned by Seller and which are used or held for use by Seller in connection with the Business. "Closing" shall have the meaning set forth in subparagraph 3.1 hereof. "Closing Date" shall have the meaning set forth in subparagraph 3.1 hereof. "Code" shall mean the United States Internal Revenue Code of 1986, as amended from time to time. "Contract" shall mean any written or oral contract, agreement, instrument, order, commitment or binding arrangement, express or implied, of any nature whatsoever. 2-

"Contract Right" shall mean any right, power or remedy under any Contract, including, but not limited to, rights to receive property or services or otherwise to derive benefits from the payment, satisfaction or performance of another party's obligations. "Deposit" shall have the meaning set forth in subparagraph 2.5.1 hereof. "Disclosure Schedules" shall have the meaning set forth in subparagraph 1.2.2 hereof. "Dollars" shall mean United States Dollars. "Employee Plans" shall have the meaning set forth in subparagraph 4.15 hereof. "Employees" shall mean all employees of Seller who are employed on the Closing Date solely in connection with the Business. "Environmental Costs" shall mean any (i) clean-up, remediation, removal, or other response costs which may be required to cause the Business or the Purchased Assets to come into compliance with Environmental Laws or to comply with the requirements of a Governmental Authority or an administrative or judicial order, and (ii) any costs, expenses, fines, penalties, liabilities, amounts paid in settlement, and judgments arising out of, relating to, or resulting from, any Environmental Matter. "Environmental Laws" shall mean all Applicable Laws governing Environmental Matters. "Environmental Matters" shall mean any matters arising out of, relating to or resulting from pollution, contamination, protection of the environment, human health or safety, sanitation, and any matters relating to emissions, discharges, disseminations, releases or threatened releases, of Hazardous Substances into the air, surface water, groundwater, soil, land surface or subsurface, buildings or facilities or otherwise arising out of, relating to or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. "Environmental Permit" shall mean any Permit that is required pursuant to any Environmental Laws, including, without limitation, the Wastewater-Land Application Permit and IWA Permit described on Schedule 2.2(iv) hereof. "Environmental Reports" shall have the meaning set forth in subparagraph 4.13(v) hereof. "Excluded Liabilities" shall have the meaning set forth in subparagraph 2.4 hereof. 3-

"Financial Statements" shall have the meaning set forth in subparagraph 4.6 hereof. "Governmental Authority" shall mean any foreign, domestic, federal, state or local governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization, or any regulatory administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "Hazardous Substances" shall mean hazardous material/waste as defined by any Environmental Laws and/or any pollutants, contaminants, toxic or hazardous substances, materials, wastes, constituents or chemicals that are regulated by any Environmental Laws including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et.seq., the Resource Conservation Act, 42 U.S.C. Section 6901 et.seq., the Clean Air Act, 42 U.S.C. Section 7401 et.seq., the Clean Water Act, 33 U.S.C. Section 1251 et.seq., the Hazard Communication Act and the Occupational Safety and Health Act 29 U.S.C. Section 651 et.seq., the Federal Insecticide, Fungicide and Rodenticide Act 17 U.S.C. Section 136 et.seq., as amended, and all state and local counterparts. "Income Taxes" shall mean all Federal, state, local and foreign income or franchise taxes, including interest, penalties and additions to tax relating thereto. "Lien" shall mean, with respect to any asset, any imperfection of title, lien, pledge, encumbrance, or other charge or security interest, or hire, purchase or leasing arrangement, in or on such asset. "Loss" or "Losses" shall mean each and all of the following items: claims, losses, liabilities, obligations, payments, damages, judgments, fines, penalties, amounts paid in settlement, and reasonable costs and expenses (including, but not limited to, reasonable fees and disbursements of counsel and other experts) incurred by the Person (the "Indemnitee") seeking indemnification (whether relating to claims asserted by or against third parties or to claims asserted against the party providing indemnification (the "Indemnitor")). "Material Adverse Effect" means a material adverse change in, or a material adverse effect upon, the Business or the Purchased Assets. "Notice" shall have the meaning set forth in subparagraph 10.5 hereof. "Optioned Property" shall mean the land more particularly described on Schedule 6.12 annexed hereto with all buildings, structures, improvements or other real property of any kind or nature whatsoever situated thereon, and all appurtenant and ancillary rights thereto, including, without limitation, easements, covenants, water rights, sewer rights and utility rights. 4-

"Permits" shall mean licenses, permits, approvals, certificates, consents, orders or other authorizations issued or granted by any Governmental Authority, which are owned by Seller and which are used or held for use by Seller in connection with the Business, including, without limitation, Environmental Permits. "Person" shall mean an individual, partnership (general or limited), corporation, joint venture, business trust, limited liability company, cooperative, association or other form of business organization (whether or not regarded as a business entity under Applicable Law), trust, estate or any other entity. "Proceedings" shall have the meaning set forth in subparagraph 4.10 hereof. "Purchase Price" shall have the meaning set forth in subparagraph 2.5.1 hereof. "Purchased Assets" shall have the meaning set forth in subparagraph 2.2 hereof. "Records" shall have the meaning set forth in subparagraph 6.6 hereof. "Real Property" means the land more particularly described on Schedule 2.2(ii) annexed hereto with all buildings, structures, improvements or other real property of any kind or nature whatsoever situated thereon, and all appurtenant and ancillary rights thereto, including, without limitation, easements, covenants, water rights, sewer rights and utility rights. "Seller" shall have the meaning set forth in the preamble. "Seller Ancillary Agreements" shall have the meaning set forth in subparagraph 3.2 hereof. "Tangible Property" means any machinery, buildings, fixtures, equipment, parts, furniture, leasehold improvements, office equipment, vehicles, tools, forms, supplies or other tangible property of any kind or nature whatsoever. "Tax Returns" shall have the meaning set forth in subparagraph 4.15 hereof. "Taxes" means all income, franchise, excise, real and personal property, sales, use, value-added, payroll, withholding, social security and other taxes imposed by any Governmental Authority, together with all interest, penalties and additions imposed with respect to such amounts. "Third Party Claim" shall have the meaning set forth in subparagraph 10.5 hereof. 5-

Anything herein contained to the contrary notwithstanding, if any of the terms defined above are also expressly defined in any of the Ancillary Agreements, then, in such event, the definition set forth in said Ancillary Agreement shall control for all purposes of said Ancillary Agreement. 1.2 Certain Rules of Construction. 1.2.1 Interpretation. As used in this Agreement, unless the context otherwise requires, words describing the singular number shall include the plural and vice versa; words denoting any gender shall include all genders; words denoting natural persons shall include corporations, partnerships and other entities, and vice versa; and the words "hereof", "herein" and "hereunder", and words of similar import, shall refer to this Agreement as a whole (including the Exhibits hereto), and not to any particular provision of this Agreement. 1.2.2 Schedules. The schedules delivered pursuant to this Agreement (collectively, the "Disclosure Schedules") are an integral part hereof, and are considered to be part of the representations and warranties to which they relate. Each such Disclosure Schedule shall be in writing and shall indicate the subparagraph pursuant to which it is being delivered; provided, however, that such disclosure shall also apply to any other subparagraph to which it is applicable, but only if such information appears on such Disclosure Schedule in such form and detail responsive to the requirements of the other Disclosure Schedule to which it may be applicable. 2. Purchase and Sale. 2.1 Agreement of Purchase and Sale. Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined in subparagraph 3.1 hereof), Seller shall sell, transfer, assign and deliver the Purchased Assets to Buyer, and Buyer shall purchase, the Purchased Assets, free and clear of all Liens except as otherwise expressly provided for in this Agreement. Buyer shall have the right to direct Seller to transfer title to some or all of the Purchased Assets directly to a designee of Buyer. 2.2 "Purchased Assets". As used in this Agreement, the term "Purchased Assets" means: (i) All of Seller's Tangible Property used in or for the Business and as described in Schedule 2.2(i); (ii) All of Seller's Real Property as described in Schedule 2.2(ii); (iii) All of Seller's Contract Rights under the Assumed Contracts; (iv) All transferable rights under all Permits granted or issued to Seller or otherwise held by Seller relating to or for the benefit of the Business and the Plant as described in Schedule 2.2(iv) hereof; and 6-

(v) All of Seller's claims, causes of action and other legal rights and remedies, whether or not known as of the Closing Date, relating to either (1) Seller's ownership of the Purchased Assets or (2) the operation of the Business, but excluding causes of action and other legal rights and remedies of Seller (A) against the Buyer with respect to the transactions contemplated by this Agreement or (B) relating exclusively to Seller's assets not included in the Purchased Assets. 2.3 Assumption of Liabilities. Subject to the terms and conditions set forth in this Agreement, on the Closing Date, Buyer shall only assume, become primarily liable for, and agree to pay and perform in due course, the Assumed Liabilities. Seller shall retain and be responsible for all Excluded Liabilities. 2.4 Excluded Liabilities. Except as may be otherwise expressly provided in this Agreement, Buyer shall not assume, and shall not be liable or responsible for, any other liabilities or obligations of Seller other than the Assumed Liabilities (collectively, "Excluded Liabilities"). 2.5 Purchase Price. 2.5.1 Amount of Purchase Price. The cash portion of the purchase price for the Purchased Assets shall be the amount of Six Million Dollars ($6,000,000) (the "Cash Purchase Price"), of which (i) Three Hundred Thousand Dollars ($300,000) shall be deposited into escrow in accordance with the provisions of subparagraph 3.3(ii) hereof as an earnest money deposit (the "Deposit") and (ii) Five Million Seven Hundred Thousand ($5,700,000) shall be paid on the Closing Date. The sum of (a) the amount of the Assumed Liabilities, plus (b) the Cash Purchase Price, is hereinafter sometimes referred to as the "Purchase Price." 2.5.2 Allocation of Purchase Price. Set forth on Schedule 2.5.2 is an allocation of the Purchase Price (the "Allocation Statement"). Buyer and Seller shall each report the Tax consequences of the purchase and sale contemplated hereby (including the filing of United States Internal Revenue Service Form 8594) in a manner which is consistent with the allocation that is set forth on the Allocation Statement. 3. Closing. 3.1 Place and Date. The closing of the purchase and sale of the Purchased Assets pursuant hereto (the "Closing") shall take place (i) at the offices of Blank Rome Tenzer Greenblatt LLP, 405 Lexington Avenue, New York, NY 10174 at 10:00 A.M., local time, on the second Business Day following the day on which the last to be fulfilled or waived of the conditions set forth in paragraph 11 hereof shall have been fulfilled or waived, or (ii) at such other time, date and/or place as may be agreed upon by the parties hereto, but no earlier than January 1, 2001 and no later than January 5, 2001. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." Notwithstanding the foregoing, Buyer shall have the right to accelerate the Closing Date to December 29, 2000 by notice to Seller, which notice must be received by Seller on or before December 27, 2000. 7-

3.2 Actions by Seller. At the Closing, Seller shall execute and deliver to Buyer (or to such other party as identified below): (i) a Bill of Sale and Assignment in substantially the form of Exhibit A attached hereto and made a part hereof and such other instruments of transfer and assignment as may be required in order to transfer to Buyer all of Seller's right, title and interest in and to the Purchased Assets (other than the Real Property); (ii) one or more warranty deeds executed by Seller sufficient to convey the Real Property as required under this Agreement, together with any required transfer tax or ancillary conveyance documents; (iii) an assignment of all Assumed Contracts (including, without limitation, all warranties and guaranties in connection therewith) and all assignable Permits (including, without limitation, the Environmental Permits); (iv) such affidavits and/or certificates reasonably required by Buyer's title company to insure the title of the Real Property in the manner required to be delivered in Section 11.1.5; and (v) deliver to Escrow Agent (as defined in subparagraph 3.3(ii) below) the sum of One Hundred Thousand Dollars ($100,000) (the "Physical Improvements Fund") to be held in an interest bearing escrow account and disbursed pursuant to the terms set forth in subparagraphs 10.3(iii), (iv) and (v) below. The documents referred to in clauses (i) through (iv) above are hereinafter sometimes severally referred to as a "Seller Ancillary Agreement" and collectively referred to as the "Seller Ancillary Agreements." 3.3 Actions by Buyer. The Buyer shall: (i) deliver the Cash Purchase Price to Seller, by wire transfer of immediately available funds to an account designated by Seller at least two (2) business days prior to the Closing Date (less the Deposit); (ii) deliver the Deposit to First American Title Company of East Idaho, Inc., as escrow agent (the "Escrow Agent"), simultaneously with the execution of this Agreement, to be held in escrow pursuant the provisions of an escrow agreement (the "Escrow Agreement") in substantially the form attached hereto as Exhibit B, which Deposit (together with any accrued interest thereon) shall be released by the Escrow Agent in accordance with provisions of the Escrow Agreement; and (iii) execute and deliver to Seller, or cause to be executed and delivered to Seller, on or prior to the Closing Date, each of the Seller Ancillary Agreements to which Buyer or any of its Affiliates or designees is a party. 8-

The documents referred to in clauses (ii) and (iii) above are hereinafter sometimes severally referred to as a "Buyer Ancillary Agreement" and collectively referred to as the "Buyer Ancillary Agreements." 4. Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer as follows: 4.1 Corporate Existence and Power. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Idaho and has all power required to own and lease the Purchased Assets and to carry on and operate the Business as now conducted. Seller is duly qualified to do business as a foreign company and is in good standing in each jurisdiction where the character of the Purchased Assets owned or leased by it or the nature of its activities makes such qualification necessary to carry on the Business as now conducted. A copy of the Operating Agreement of Seller as amended to date (the "Operating Agreement") has been furnished to Buyer and is complete and correct. 4.2 Authority. The execution and delivery by Seller of this Agreement and the Seller Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby, and the performance by Seller of its obligations hereunder and thereunder, are within the powers of Seller, and have been duly authorized by all necessary action on the part of Seller, and the Seller has all necessary power with respect thereto. This Agreement constitutes, and each Seller Ancillary Agreement when executed and delivered by Seller pursuant to this Agreement shall constitute, a legal, valid and binding obligation of Seller in accordance with its terms. 4.3 Ownership of Seller. The members of Seller set forth on Schedule 4.3 (the "Members") own, beneficially and of record, all of the outstanding membership interests of Seller. 4.4 Noncontravention. The execution and delivery by Seller of this Agreement and the Seller Ancillary Agreements, the performance by it of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, do not and will not (with or without the giving of notice or the passage of time) (a)(i) contravene or conflict with the Articles of Organization or Operating Agreement of Seller; (ii) contravene or conflict with or constitute a violation of any provision of Applicable Law; or (iii) result in a breach, conflict, violation, or constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which Seller is entitled under, any Assumed Contract or Permit, or (b) result in the creation or imposition of any Lien upon any of the Purchased Assets. 4.5 Consents. Except as set forth on Schedule 4.5, the execution and delivery by Seller of this Agreement and the Seller Ancillary Agreements, the performance by Seller of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby, require no action by, consent or approval of, or filing with, any Governmental Authority or other Person. 9-

4.6 Financial Statements of the Business. Seller has previously delivered to Buyer: (i) the unaudited balance sheets of the Seller as at December 1996, 1997 and 1998 , and (ii) the unaudited statements of operations of the Seller for the years then ended (collectively, the "Financial Statements"). The Financial Statements fairly present the financial position of the Business as at the dates thereof and its results of operations for the periods indicated. 4.7 Absence of Certain Changes. Since December 31, 1998, Seller has not, with respect to the Purchased Assets: (i) experienced any event or circumstances which has had or would be reasonably expected to have a Material Adverse Effect; (ii) subjected any of the Purchased Assets to a Lien; (iii) except for the lease of the Plant to Beatrice Foods, which lease expires on November 30, 2000, sold, transferred, leased to others or otherwise disposed of any of the items included in the Purchased Assets, or cancelled or compromised any debt or claim, or waived or released any right of substantial value; (iv) suffered any damage, destruction or loss (whether or not covered by insurance) which, individually or in the aggregate, has had a Material Adverse Effect; (v) encountered any labor union organizing activity, had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or had any material change in its relations with its employees, agents, customers or suppliers; (vi) instituted, settled or agreed to settle any Proceeding before any court or governmental body other than in the ordinary course of the Business consistent with past practice; (vii) entered into any Contract other than in the ordinary course of the Business; or (viii) agreed to do any of the foregoing. 4.8 Title to and Adequacy of Purchased Assets. The Purchased Assets and the rights granted to Buyer pursuant to the Seller Ancillary Agreements comprise all of the properties and assets used and/or owned by Seller (other than the Optioned Property). At the Closing, Buyer shall acquire good and valid title to the Purchased Assets free and clear of all Liens. Seller has good and valid title to all of the Purchased Assets, free and clear of all Liens. To the best of Seller's knowledge, the buildings, plants, structures and equipment of the Seller which are included among the Purchased Assets are in operating condition and are (i) structurally sound and (ii) in good condition and repair. Seller has no knowledge about whether the buildings, plants, structures and equipment of the Seller which are included among the Purchased Assets are (i) safe for the type of business currently conducted by the Seller or (ii) fit for the particular purpose for which they are intended. To the best of Seller's knowledge, none of such 10-

buildings, plants, structures or equipment is in need of maintenance or repairs except for ordinary, routine maintenance or repairs that are not material in nature or cost. 4.9 Legal Proceedings. There are no actions, suits, hearings, arbitrations, proceedings (public or private) or governmental investigations that have been brought by or against any Governmental Authority or any other Person (collectively, "Proceedings") pending or threatened against Seller with respect to the Business or any of the Purchased Assets or the Assumed Liabilities as to which there is a likelihood of a determination or resolution adverse to Seller; and there are no outstanding orders, judgments or decrees (other than those of general application) of any Governmental Authority which are binding upon any of the Purchased Assets or the Business. There are no Proceedings pending or threatened against Seller which seek to enjoin or rescind any of the transactions contemplated by this Agreement or otherwise prevent Seller or any of its Affiliates from complying with any of the terms and provisions of this Agreement or any of the Seller Ancillary Agreements. There is no condemnation proceeding pending with regard to all or any part of the Real Property and, to Seller's knowledge, there is no such proceeding contemplated by any Governmental Authority. 4.10 Contracts and Leases. Schedule 4.10 sets forth a complete list of all Contracts that shall be assumed by Buyer hereunder (the "Assumed Contracts"). Each Assumed Contract is a legal, valid and binding obligation of the Seller and is enforceable against each other party thereto in accordance with its terms. Neither Seller nor any other party thereto is in default or has failed to perform any obligation thereunder. Complete and correct copies of each Contract have been previously delivered or made available to Buyer. There are no leases, tenancies or rights of occupancy affecting the Real Property and the Real Property shall be delivered free and clear of any of the foregoing. 4.11 Permits. Schedule 2.2(iv) hereof sets forth all Permits which Seller has obtained and which, to the best of Seller's knowledge, are required to be obtained with the respect to the Purchased Assets. Except as set forth on Schedule 4.11 hereof, all such Permits have been duly obtained and are in full force and effect, all conditions and requirements applicable to such Permits have been complied with and there is no pending threat of modification or cancellation of any such Permit; and no buildings, improvements or Tangible Property located on the Real Property or the current use of the Real Property depend on any dedication, variance, subdivision, special exception or other special governmental approval which has not been unconditionally granted for their continuing legality; and neither the Real Property, the Tangible Property nor the maintenance or use thereof violates any Applicable Law relating thereto. 4.12 Compliance with Laws. Except as set forth on Schedule 4.12, (i) to the best of Seller's knowledge, the use and ownership of the Purchased Assets by Seller do not violate any Applicable Law or Permits (including, but not limited to, any Environmental Laws or Environmental Permits); (ii) to the best of Seller's knowledge, no Applicable Laws are or shall be violated by the construction, maintenance, operation or use of the Purchased Assets, including, without limitation, any buildings or other improvements on the Real Property or by such continued maintenance operation or use of the parking of delivery areas; and (iii) Seller has 11-

received no written notice of any violation of, or applicable to, any Applicable Law or Permit with respect to the Business or the Purchased Assets. 4.13 Environmental Matters. (i) Except as set forth on Schedule 4.13(i), there are no underground or aboveground storage tanks, active or inactive waste treatment and/or disposal facilities including, but not limited to, incinerators or surface impoundments at, on, under or within any of the facilities of the Business; and none of the foregoing has been closed or removed by Seller; (ii) Except as set forth on Schedule 4.13(ii), Seller has not received any notice from a Governmental Authority that it is, or may be deemed to be, a "potentially responsible person" (as such term may be defined in any Environmental Law) or otherwise liable in connection with any waste disposal site allegedly containing any Hazardous Substances or other location used for the disposal of any Hazardous Substances, or notice of any failure by Seller to comply in any material respect with any Environmental Law or the requirements of any Environmental Permit held by Seller; (iii) Except for (x) those items identified in the environmental reports referenced in Schedule 4.13(i) and (y) de minimis quantities of substances stored and/or or disposed of in compliance with Environmental Laws, during the period of Seller's ownership of the Real Property and, to the best of the knowledge of Seller prior to Seller's ownership of the Real Property, the Real Property has not been used for the generation, storage or disposal of Hazardous Substances or as a land-fill or other waste disposal site and no Hazardous Substances or any toxic wastes, substances or materials (including, without limitation, asbestos) have been released or discharges from or onto the Real Property. The term "Hazardous Substances" includes, without limitation, petroleum, including crude oil or any fraction thereof, natural gas, natural gas liquids, liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural gas or such synthetic gas), and any substance, material waste, pollutant or contaminant listed or defined as hazardous or toxic under any Environmental Law; (iv) Seller has not been required by any Governmental Authority to perform any remedial activity or other response action in connection with any Environmental Matter; (v) Seller has made available to Buyer all studies, analyses and test results in the possession, custody or control of Seller regarding Environmental Matters relating to the Business and the Purchased Assets (collectively, the "Environmental Reports"); (vi) Except as described in the Environmental Reports and to the best of Seller's knowledge, there are no conditions, events, circumstances, facts, activities, practices, incidents, actions or omissions at or on the facilities of the Business, or with respect to the operation of the Business or the use or ownership of the Purchased Assets: 12-

(a) that would reasonably be expected to give rise to any Environmental Costs to the Buyer; or (b) that would reasonably be expected to form the basis of any Proceedings relating to any Environmental Matter; (vii) To the best of Seller's knowledge, no event has occurred which, with the passage of time or the giving of notice or both, would constitute non-compliance with Environmental Laws. Seller has received no written notice of any actions, suits, claims, or proceedings relating to a violation or non-compliance with any Environmental Laws pending which may affect the Real Property, or with respect to the disposal, discharge or release of Hazardous Substances at or from the Real Property. 4.14 Taxes. With respect to the Purchased Assets (including, without limitation, the Real Property), Seller has: (i) timely filed in accordance with all Applicable Laws, all material returns, statements, reports, estimates, declarations and forms (collectively, "Tax Returns") required to be filed by it with respect to Taxes, (ii) paid all Taxes shown to have become due pursuant to such Tax Returns, and (iii) paid all Taxes for which a notice of, or assessment or demand for, payment has been received, other than Taxes which are being contested in good faith. All Tax Returns filed by Seller are true, correct and complete in all material respects, and all Taxes for which Seller is liable have been paid or adequate provisions in the financial books of the Seller have been made. All material amounts required to be collected or withheld by Seller with respect to Taxes have been duly collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly remitted, no extension of time within which to file any Tax Return under which Buyer could be held responsible has been requested, which Tax Return has not since been filed, and there are no waivers or extensions of any applicable statute of limitations for the assessment or collection of Taxes with respect to any Tax Return for which Buyer could be held responsible which remain in effect. 4.15 Employee Plans. Schedule 4.15 lists each stock bonus, stock option, stock purchase, bonus, incentive, deferred compensation, vacation, insurance, disability, severance, termination indemnity, or other plan, fund, program, policy, contract or arrangement providing employee benefits maintained or contributed to by Seller or any of its Affiliates in which any present or former employees of the Business participated or have participated and under which any of them or any beneficiaries of any of them has accrued and remains entitled to any benefits (collectively, the "Employee Plans"). Seller has heretofore delivered or made available to Buyer a copy of each Employee Plan, or a written summary thereof which is correct and complete in all material respects. Seller has also made available to Buyer copies of all material documents and instruments relating to each of the Employee Plans. Each of the Employee Plans which is intended to be qualified under Section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the Internal Revenue Service as to its qualification under the Code and to the effect that such trust is exempt from taxation under Section 501(a) of the Code. All contributions to the Employee Plans attributable to any period on or before the Closing Date shall have been paid or accrued prior to the Closing Date. Each of the Employee Plans has been operated and administered in all 13-

material respects in accordance with Applicable Law, including, but not limited to, the Code and the Employee Retirement Income Security Act of 1974, as amended. 4.16 Insurance. The Business and the Purchased Assets are, and prior to the date hereof have been, insured against risks normally insured against, in amounts normally carried, by companies engaged in similar businesses. Set forth on Schedule 4.16 attached hereto is a true, correct and complete list of the insurance policies in effect with respect to the Business and Purchased Assets (including the deductibles), which policies shall expire on November 30, 2000. Seller shall (i) cause to be maintained in full force and effect until November 30, 2000 all of the insurance policies listed on Schedule 4.16. and (ii) obtain and maintain property and casualty insurance with respect to the Purchased Assets in the minimum amount of Six Million Dollars ($6,000,000) from December 1, 2000 through the Closing Date. No written notice has been received from the insurance company which issued any of such insurance policies stating in effect that such policy will not be renewed or will be renewed at a higher premium than is presently payable thereunder. 4.17 Tax Lots. The Real Property is comprised of tax lot 10343100. 4.18 No Repairs Required. To the best of Seller's knowledge, all buildings and improvements (including all roads, parking areas, curbs, sidewalks, sewers, water system, heating, ventilation, air conditioning and other utilities and building systems) on the Real Property have been constructed on soil having sufficient density and installed in accordance with the plans and specifications approved by the governmental authorities having jurisdiction and are in good working order without defects in workmanship and do not require any repairs, other than such repairs as are necessary for normal maintenance or which may be necessary due to normal wear and tear; and Seller has not received any notice from any insurance company or underwriter requesting performance of any repairs or alterations to the Real Property or of any defect in the Real Property or that would adversely affect the insurability of the Real Property or cause an increase in insurance premiums. 4.19 Building Systems. To the best of Seller's knowledge, all water, sewer, gas, electric, telephone, drainage facilities and other utilities required for the normal and proper operation of the Real Property are installed and connected to the Real Property with valid permits and are serving the Real Property and are adequate to serve the Real Property for its intended use and to permit full compliance with all requirements of Applicable Law; all permit and connection fees are fully paid and no action is necessary on the part of Buyer to transfer such permits to it; all utilities serving the Real Property either enter the Real Property through adjoining public streets or if they pass through adjoining private land, do so in accordance with valid public easements or private easements of unlimited duration; and no fact or condition exists which would result in the termination of such utilities services to the Real Property. 4.20 Independent Unit. To the best of Seller's knowledge, the Real Property is an independent unit which does not now rely on any facilities (other than facilities covered by easements of unlimited duration appurtenant to the Real Property or facilities of municipalities or public utilities or the other Permitted Liens) located on any property that is not part of the Real Property to fulfill any municipal or other governmental requirement, or for the 14-

furnishing to the Real Property of any essential building systems or utilities (including drainage facilities, catch basins and retention ponds). No other building or other property that is not part of the Real Property relies upon any part of the Real Property to fill any municipal or other governmental requirement, or to provide any essential building systems or utilities. 4.21 No Assessments. To the best of Seller's knowledge, no assessments or impact fees for public improvements have been made or charged or, to the best of Seller's knowledge, proposed against the Real Property which remain unpaid or which will remain unpaid at the Closing, including without limitation those for street widenings, intersection restructurings, construction of traffic signals, sewer, water, gas and electric lines and mains, streets, roads, sidewalks and curbs. In the event any such assessments or impact fees are pending or proposed or if any work for public improvements, including but not limited to street widenings, intersection restructurings, traffic signals, sewer, water, gas and electric lines and mains, streets, roads, sidewalks or curbs has commenced, Seller shall be responsible for the portions, or installments, if any, of such assessments due and payable prior to the Closing Date. 4.22 Violations. To the best of Seller's knowledge, there is no violation of any covenant, condition or restriction or any agreement contained in any instrument encumbering or benefiting the Real Property. Seller has not granted any rights to adjoining land owners which shall be binding upon Buyer. 4.23 Mechanic's Liens. To the best of Seller's knowledge, there are no, and on the Closing Date there shall be no, filed or inchoate mechanics', materialmen's or similar liens against the Real Property or any portion thereof. 4.24 No Contracts or Agreements. Except as set forth on Schedule 4.24, there are no contracts or agreements of any kind relating to the Real Property to which Seller or its agents are a party which shall be binding on Buyer after the Closing. There are no facts or events which could materially affect the Real Property which have not been disclosed in writing to Buyer. 4.25 No Liens. There are no Liens on the Real Property except (a) as disclosed in the title insurance report attached to Schedule 4.25 attached hereto and (b) zoning restrictions on the use of the Real Property (provided such zoning restrictions are not violated by present use or any reasonable expansion of extension of present use) and minor defects or irregularities in title, provided the same do not individually or in the aggregate render title unmarketable or otherwise adversely affect the Seller's Real Property. Seller has the right to use all easements and rights of way including, but not limited to easements for power lines, water lines, sewers and roadways and other means of ingress and egress, which are necessary for the use of the Real Property. 4.26 Information as to Seller. None of the representations or warranties made by the Seller in this Agreement or in any agreement or document executed and delivered by or on behalf of it pursuant hereto are false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein contained not misleading. 15-

5. Representations and Warranties of Buyer. Buyer hereby represents and warrants to Seller as follows: 5.1 Corporate Existence and Power. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate power required to own, lease and operate its properties and assets and to carry on its business. 5.2 Corporate Authorization. The execution and delivery by Buyer of this Agreement and the Buyer Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby, and the performance by Buyer of its respective obligations hereunder and thereunder, are within the corporate powers of Buyer and has been duly authorized by all necessary corporate action on the part of Buyer. This Agreement constitutes, and each Buyer Ancillary Agreement when executed and delivered by Buyer pursuant to this Agreement shall constitute, a legal, valid and binding obligation of Buyer in accordance with its terms. 6. Certain Covenants. 6.1 Further Assurances. Subject to the terms and conditions herein contained, promptly after the date hereof each of the parties hereto shall cooperate with the other and use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable, to ensure that the conditions set forth in paragraph 11 hereof are satisfied and to consummate the transactions contemplated by this Agreement and the Ancillary Agreements. 6.2 Consents and Authorizations. Seller shall obtain, and shall cooperate with Buyer in obtaining, all authorizations, consents, orders and approvals of any Governmental Authority or any other Person that is necessary in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, and to take all reasonable actions to avoid the entry of any order or decree by any Governmental Authority prohibiting the consummation of the transactions contemplated hereby or thereby. 6.3 Conduct of Business. 6.3.1 Affirmative Covenants. During the period from the date of this Agreement until the Closing Date, except as Buyer may otherwise consent to in writing or as otherwise contemplated by this Agreement (including the Disclosure Schedules), Seller shall in respect of the Purchased Assets: (i) Except with respect to those employees that Buyer notifies Seller that Buyer does not intend to retain after the Closing, Seller shall use its best efforts to keep available the services of the employees who are currently working at the Plant up to and including the Closing Date. 16-

(ii) maintain the Purchased Assets in the usual, regular and ordinary course and in accordance with past practice; (iii) use its best efforts to maintain insurance in full force and effect with respect to the Purchased Assets that is comparable in amount, scope and type to that in effect on the date of this Agreement; (iv) maintain the Books and Records in the usual, regular and ordinary manner, on a basis consistent with prior years; (v) perform and comply in all material respects with its obligations under the Assumed Contracts; (vi) maintain in existence all licenses, permits and approvals in existence now or in the future with respect to the ownership, operation or improvement of the Purchased Assets and shall not apply or consent to any action or proceeding which shall have the effect of terminating or changing such licenses, permits and approvals or the zoning of the Real Property; and (vii) comply with all notices of violations of law or municipal ordinances, orders or requirements noted in or issued by any Governmental Authority, against or affecting the Purchased Assets as of the Closing and the same shall be discharged of record prior to the Closing. 6.3.2 Negative Covenants. During the period from the date of this Agreement until the Closing Date, except as Buyer may otherwise consent to in writing or as otherwise contemplated by this Agreement (including the Disclosure Schedules), Seller shall not in respect of the Purchased Assets. (i) vary or amend the terms of any of the Assumed Liabilities other than in the ordinary course of business consistent with past practice; (ii) subject any of the Purchased Assets to any Lien; (iii) sell, lease, transfer, assign or otherwise dispose of any material portion of the Purchased Assets; (iv) enter into any material Contract, or materially modify, terminate, amend or grant any waiver in respect of any Contract, except, in either case, in the ordinary course of the Business consistent with past practice; (v) hire executive Employees, grant to any Employee any increase in compensation in any form (other than pursuant to existing Contracts and Employee Plans, and except for regularly scheduled increases made in the ordinary course of the Business and consistent with past practice); 17-

(vi) enter into any transaction, take any action, or by inaction permit any event to occur, that would result in any of the representations and warranties of Seller contained herein not being true and correct in all material respects immediately after the occurrence of such transaction, action or event or on the Closing Date; (vii) mortgage or charge any of the Purchased Assets; (viii) sell, assign, create, terminate, or modify any right, title or interest whatsoever in or to the Real Property or create, or permit to exist, any lien, encumbrance, easement, or charge thereon, without properly discharging same prior to Closing; (ix) list the Real Property with any broker or otherwise solicit or make or accept any offers to sell the Real Property, engage in any discussions or negotiations with any third party with respect to the sale or other disposition of the Real Property, or enter into any contracts or agreements (whether binding or not) regarding any disposition of the Real Property, other than such offers, discussions, negotiations, contracts or agreements which are contingent upon the failure of the transactions contemplated in this Agreement to be consummated in accordance with the terms hereof; (x) assign, transfer, encumber or remove any intangible property or Tangible Property at the Real Property; (xi) engage in any activity that would permit any party to file a Lien against the Purchased Assets after the Closing Date; or (xii) agree or otherwise commit to take any of the actions prohibited by the foregoing clauses (i) through (xi). 6.4 Access to Information. During the period commencing on the date of this Agreement and ending on the Closing Date (i) Seller shall provide, or cause to be provided to, Buyer and its representatives (A) such financial and operating data and other information as Buyer or its representatives may from time to time reasonably request with respect to the Business and the Purchased Assets, and (B) access during normal business hours to the assets, properties, plants, offices, warehouses and other facilities, Books and Records of and Contracts relating to the Business and the Purchased Assets as Buyer may from time to time reasonably request; and (ii) Buyer and its representatives shall be entitled to consult with the representatives, officers and employees of Seller with respect to the Business. Seller agrees that no investigation by Buyer or its representatives shall affect or limit the scope of the representations and warranties of Seller contained herein or in any of the Seller Ancillary Agreements. 6.5 Mail; Payments. Seller shall promptly deliver to Buyer any mail or other communication received by it after the Closing Date pertaining to the Business or the Purchased Assets. Seller and Buyer shall promptly (but, in any event, not more than five Business Days after receipt thereof) pay or deliver to the other party any cash or checks which have been mistakenly sent to it but which should properly have been sent to such other party. 18-

6.6 Access to Records. (a) For a period of at least three years from the Closing Date, Seller shall retain or cause to be retained all agreements, documents, books, records and files in its possession or in the possession of any of its Affiliates relating to the Business or the Purchased Assets (collectively, the "Records"). After the Closing, upon reasonable advance notice given to Seller, Seller shall give, or cause to be given, to the representatives, employees, counsel and accountants of Buyer, access during normal business hours to the books and records relating to the Business and the Purchased Assets, and shall permit such representatives to examine and copy such Records to the extent reasonably requested by the other party in connection with the preparation of tax and financial reporting matters, audits, legal proceedings, governmental investigations and other valid business purposes. 6.7 Further Assurances. At any time and from time to time after the Closing Date, Buyer and Seller shall each execute or cause to be executed and deliver or cause to be delivered all such documents and instruments, and do or cause to be done all such acts, as the other may reasonably request in order to: (i) transfer, assign, deliver and convey to Buyer the Business and the Purchased Assets free and clear of all Liens; (ii) implement the assumption by Buyer of the Assumed Liabilities; (iii) implement the provisions of the Ancillary Agreements; or (iv) otherwise carry out the intent of the parties under this Agreement and the Ancillary Agreements. 6.8 Public Announcements. Each of the parties hereto (i) shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby, and (ii) shall not, except as may be required by Applicable Law, issue any such public statement without the prior verbal consent of the other parties (such consent not to be unreasonably withheld or delayed). 6.9 Waiver of Compliance with Bulk Transfer Laws. Buyer waives compliance by Seller with the provisions of Article 6 of the Uniform Commercial Code ("Bulk Sales Laws") in each applicable jurisdiction. Seller shall comply with all other Laws relating to bulk sales and/or the sale and purchase of the Purchased Assets. 6.10 Noncompetition. Until the third anniversary of the Closing Date, neither Seller nor the Members (other than Gary Seamons) shall and shall cause each of their Affiliates not to, directly or indirectly, (A) engage or become interested in any entity (whether as owner, manager, operator, licensor, licensee, lender, partner, stockholder, joint venturer, employee, consultant or otherwise) which sells manufactures, distributes or markets any products or services within a radius of one hundred (100) miles of the Plant that are competitive with the products and services sold, manufactured, distributed or marketed by the Business or (B) take any other action which constitutes an interference with or a disruption of Buyer's use, ownership and enjoyment of the Purchased Assets. On or prior to the Closing Date, Seller shall cause Gary Seamons to execute and deliver to Buyer a noncompetition agreement containing provisions substantially similar to the provisions of this subparagraph 6.10. 6.11 Supplemental Disclosure Schedules. Seller shall, from time to time after the date of this Agreement and prior to the Closing Date (but no later than three days prior to the Closing), by notice given in accordance with this Agreement, supplement or amend 19-

any Disclosure Schedule to correct any matter which would constitute a breach of any of its representations and warranties herein contained; provided, however, that Buyer shall not be obligated to consummate the transactions contemplated by this Agreement if any such amended disclosure shall modify the terms and conditions set forth herein to Buyer's material detriment. No such supplemental or amended Disclosure Schedule shall be deemed to cure any breach of such representation or warranty for any purpose if the Closing does not occur as a result of such breach. 6.12 Purchase Option. At any time during a six (6) month period commencing on the Closing Date, Buyer shall have the option, but not the obligation, to purchase the Optioned Property (as described in Schedule 6.12), at a purchase price of One Hundred Twenty-Five Thousand Dollars ($125,000), by notifying the Seller in writing of its desire to do so. The closing of the transaction for the purchase by Buyer of the Optioned Property shall take place on the date designated by Buyer in its notice to Seller, which date shall not be more than sixty (60) nor less than thirty (30) days following the date of such notice, whereupon Buyer shall pay to Seller the aforesaid purchase price and Seller shall deliver to Buyer such duly executed deeds, conveyance documents and bills of sale and any other documents reasonably requested by the Buyer to transfer title to the Optioned Property to the Buyer, free and clear of all Liens. 7. Certain Tax Matters. 7.1 Transfer Taxes. Seller shall be responsible for any and all (i) sales, use, transfer, stamp, conveyance, recording, value-added and other similar Taxes (other than any Income Taxes) imposed under Applicable Law, and (ii) recording and filing fees, notarial fees and other similar costs of Closing, with respect to the purchase and sale of the Purchased Assets and the Business or otherwise on account of this Agreement or any of the Ancillary Agreements, or any of the transactions contemplated hereby or thereby. 7.2 Apportionment of Certain Taxes. As of the Closing Date, any personal property taxes, real estate taxes, assessments and penalties and water, sewer, utility charges and other items in respect of the Purchased Assets and the Assumed Liabilities shall be apportioned (on a pro rata basis, based upon the number of days in the relevant taxable period) between Seller and Buyer. Seller shall be responsible for all such Taxes relating (as determined under Applicable Law) to periods up to and including the Closing, and Buyer shall be responsible for all such taxes relating to post-Closing periods. Any payments or reimbursements of such Taxes required to be made by Seller to Buyer or by Buyer to Seller pursuant to this subparagraph 7.2 shall be paid by Seller or Buyer within the later of five days of Seller's or Buyer's request therefor or five days prior to the date on which Seller is required to pay or cause to be paid the related Tax liability. 20-

8. Employment. Buyer may, but shall not be obligated to offer employment, effective as of the Closing Date, to certain of the Employees. Buyer shall not assume nor be liable to pay any pre-closing liabilities of Seller in respect of the Employees. 9. Environmental Matters. Seller shall be responsible for all Environmental Costs relating to the Business or the Purchased Assets to the extent arising out of events occurring or conditions existing prior to the Closing Date and Buyer shall be responsible or all Environmental Costs relating to the Business or the Purchased Assets arising out of events occurring or conditions existing subsequent to the Closing Date. 10. Survival; Indemnification. 10.1 Survival of Representations, Warranties and Covenants. Each representation and warranty contained in this Agreement or any of the Ancillary Agreements shall survive the execution and delivery hereof and the Closing Date indefinitely. The covenants and agreements contained in this Agreement or any of the Ancillary Agreements shall survive the Closing Date and shall continue in effect in accordance with their respective terms. 10.2 Indemnification by Seller. Subject to the terms and conditions herein contained, from and after the Closing Date, Seller shall indemnify and hold harmless Buyer, its Affiliates, and their respective officers, directors, employees, agents, consultants, representatives and successors from and against any Losses which may be sustained or incurred by any of them and which arise out of or result from: (i) any breach by Seller of any representation or warranty made by them in this Agreement or in any of the Seller Ancillary Agreements; (ii) any failure by Seller to perform any of their obligations contained in this Agreement or in any of the Seller Ancillary Agreements (subject, in the case of each of the Seller Ancillary Agreements, to any and all limitations upon and qualifications with respect to the liability of Seller or any of its Affiliates which may be set forth therein); (iii) Buyer's waiver of or Seller's noncompliance with any applicable Bulk Sales Laws; and/or (iv) the Excluded Liabilities. This indemnification obligation shall also apply to claims directly by Buyer against the Seller as well as to third party claims. 10.3 Seller's Undertaking. (i) Seller hereby undertakes to cause to be completed the physical improvements, including, without limitation, the installation of up to six (6) monitoring wells if required by Idaho DEQ (the "Physical Improvements") and other recommendations identified in paragraph 4 of that certain letter dated September 12, 21-

2000 from Idaho DEQ (the "DEQ Letter") regarding Permit LA-000084-03 (the "DEQ Permit") no later than June 30, 2001. If Seller has not caused the Physical Improvements and such other recommendations to be completed on or before June 30, 2001, or immediately in the event of an emergency, including, without limitation, the threat of the Idaho DEQ canceling the DEQ Permit ("Emergency"), Buyer may cause the Physical Improvements or such other recommendations to be completed and may withdraw the money in the Physical Improvements Fund and apply the proceeds of such fund to the cost of the Physical Improvements and such other recommendations. Seller further undertakes to cooperate with Buyer to cause Gary Seamons, the operator (the "Operator") of the land subject of the Permit, to comply with his obligations under the Whey Transport and Disposal Agreement (included in Schedule 4.10) and with the recommendations set forth in paragraph 4 of the DEQ Letter. Notwithstanding the foregoing, Seller specifically does not assume any of the management or reporting obligations or responsibilities of Buyer (as opposed to requirements under paragraph 4 of the DEQ Letter to perform installations or physical work or improvements to effectuate such management or reporting obligations or responsibilities) which may arise from and after the Closing as the holder of the DEQ Permit (such obligations or responsibilities hereinafter the "Excluded Obligations"). (ii) Seller shall indemnify and hold harmless Buyer, its Affiliates, and their respective officers, directors, employees, agents, consultants, representatives and successors from and against any Losses which Buyer may sustain or incur which arise out of or result from any matters described in the DEQ Letter; provided, however, that Seller shall not be required to indemnify Buyer from any Losses which Buyer may sustain or incur which arise out of Buyer's action or inaction with respect to the Excluded Obligations. (iii) On or prior to June 30, 2000, (x) Seller shall obtain a letter from Idaho DEQ confirming that the recommendations identified in paragraph 4 of the DEQ Letter (other than the Excluded Obligations) have been completed to the satisfaction of Idaho DEQ ("Confirmation Letter"), and Buyer shall cooperate with Seller with respect thereto, and (y) Seller shall deliver to each of Escrow Agent and Buyer a copy of the Confirmation Letter and a statement from Seller that the Physical Improvements have been completed. Unless Escrow Agent has already disbursed the Physical Improvement Funds pursuant to subparagraph 10.3(i) or unless Escrow Agent has received an objection from Buyer not later than ten (10) days after the date Buyer received from Seller a copy of the Confirmation Letter and said statement from Seller, Escrow Agent shall deliver the Physical Improvements Fund to Seller, less Escrow Agent's fees and expenses. (iv) If Seller has not caused the Physical Improvements and other recommendations identified in paragraph 4 of the DEQ Letter (other than the Excluded Obligations) to be completed by June 30, 2001 (as evidenced by the delivery of the Confirmation Letter to Escrow Agent and Buyer), or earlier in the event of an Emergency, Buyer may notify Escrow Agent in writing and Escrow Agent shall provide a copy of such notice to Seller, and, unless Escrow Agent has received an objection from Seller not later than ten (10) days after the date such notice was given to Seller, Escrow 22-

Agent shall deliver the Physical Improvements Fund to Buyer, less Escrow Agent's fees and expenses. (v) If Escrow Agent has received no notice from either party hereto pursuant to this subparagraph 10.3 by December 31, 2001, Escrow Agent shall deliver the Physical Improvements Fund to Seller, less Escrow Agent's fees and expenses. 10.4 Indemnification by Buyer. Subject to the terms and conditions herein contained, from and after the Closing Date, Buyer shall indemnify and hold harmless Seller and its Affiliates, and their respective officers, directors, employees, agents, consultants, representatives and successors from and against any Losses which may be sustained or incurred by any of them and which arise out of or result from any breach by Buyer or any of its Affiliates of any representation or warranty made by it in this Agreement or in any of the Buyer Ancillary Agreements or the Assumed Liabilities. 10.5 Third Party Claims. Promptly after receipt by an Indemnitee of written notice of the assertion of a claim or the commencement of any action, litigation or proceeding by any third party (a "Third-Party Claim") with respect to any matter for which indemnification is or may be owing pursuant to subparagraphs 10.2, 10.3 or 10.4, the Indemnitee shall give written notice thereof (the "Notice") to the Indemnitor; provided, however, that failure of the Indemnitee to give the Indemnitor the Notice as provided herein shall not relieve the Indemnitor of any of its obligations hereunder unless the Indemnitor shall have been materially prejudiced thereby. The Indemnitor shall have the right, at its option and at its own expense, to participate in or, by giving notice to the Indemnitee no later than 30 days after delivery of the Notice, to take control of, the defense, negotiation and/or settlement of any such Third-Party Claim with counsel reasonably satisfactory to the Indemnitee. The Indemnitee shall have the right to participate in the defense, negotiation and/or settlement of any such Third-Party Claim with counsel of its own choosing. Notwithstanding the foregoing, with respect to any such Third-Party Claim, the defense, negotiation and/or settlement of which the Indemnitor has taken control, the Indemnitee shall have the right to retain separate counsel to represent it, and the Indemnitor shall pay the reasonable fees and expenses of such separate counsel, if the named parties to any such Third Party Claim include both the Indemnitee and Indemnitor and the Indemnitee reasonably determines that defenses are available to it that are unavailable to the Indemnitor. The Indemnitor and the Indemnitee shall each cooperate with and render to each other such assistance as may reasonably be requested in order to insure the proper and adequate defense of any such Third Party Claim or proceeding, which assistance shall include, without limitation, making appropriate personnel reasonably available for any discovery or trial. If the Indemnitor fails or refuses to undertake the defense of any such Third-Party Claim within 30 days after delivery of the Notice, the Indemnitee shall have the right to take exclusive control of the defense, negotiation and/or settlement of such Third-Party Claim at the Indemnitor's expense. Neither the Indemnitor nor the Indemnitee shall settle or compromise any Third-Party Claim without the consent of the other, which consent shall not be unreasonably withheld. The provisions of this subparagraph 10.5 shall also govern any right of indemnification granted pursuant to any other provision of this Agreement or any of the Ancillary Agreements (unless such other provision of this Agreement or the relevant Ancillary Agreement specifically sets forth a different procedure). 23-

11. Conditions to Closing. 11.1 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated hereby shall be subject to the satisfaction or written waiver by Buyer, on or before the Closing Date, of each of the following conditions: 11.1.1 Representations, Warranties and Covenants. (i) Seller shall have performed in all material respects each of the agreements and covenants made by it herein and required to be performed on or prior to the Closing Date; and (ii) the representations and warranties of Seller contained herein shall be true, complete and correct at and as of the Closing Date, as if made at and as of such date except for the passage of time. 11.1.2 Deliveries. Seller shall have delivered, or caused to be delivered to Buyer, duly executed counterparts of each of the Seller Ancillary Agreements. 11.1.3 Opinion of Counsel. Buyer shall have received an opinion of counsel for Seller and its Affiliates, dated the Closing Date, to the effect specified in Exhibit C attached hereto and made a part hereof. 11.1.4 Consents and Approvals. All consents, waivers, approvals, licenses and authorizations by third parties and Governmental Authorities (and all amendments and modifications to existing agreements with third parties) required as a precondition to the performance by Seller of its obligations hereunder (including, without limitation, the assignment by Seller of the Assumed Contracts and Permits to Buyer) shall have been duly obtained and shall be in full force and effect. 11.1.5 Title of the Real Property. (i) Seller shall have given to Buyer, and Buyer shall have accepted from Seller, good, marketable and insurable fee simple title to the Real Property, subject only to the title exceptions listed on Schedule 11.1.5 and any title exceptions caused by Buyer or its employees or agents, and any title exceptions approved by Buyer in writing after the date hereof. Title shall be evidenced by an ALTA Owner's Policy and shall contain at Buyer's election, the expense of which shall be borne by Buyer, to the extent available under the laws of the State of Idaho, the following endorsements: (i) separate tax lot, (ii) legal lot, (iii) access, (iv) owner's comprehensive, (v) legal description same as survey, (vi) zoning 3.1 with parking and (vii) contiguity endorsements. Such policy shall, in addition, insure that any covenants, conditions or restrictions listed on Schedule 11.1.5 have not been violated and, if violated, shall not cause a forfeiture or reverter of title. (ii) Buyer shall have procured the title policy and a current ALTA-ACSM survey of the Real Property certified to Buyer and Buyer's lender and title 24-

company in form acceptable to Buyer. Seller shall pay the premium for the title policy and the Buyer shall pay the surveyor's fees for the survey. 11.1.6 Confidentiality Agreement. Seller and the Members shall have executed and delivered an agreement, in form and substance reasonably satisfactory to the Buyer, not to disclose confidential information relating to the Purchased Assets for a period of two (2) years from the Closing Date. 11.1.7 Certificate of Manager. Seller shall have furnished the Buyer with a certificate, executed by the Manager of Seller, dated the Closing Date, to the effect that it has fulfilled the conditions specified in subparagraphs 11.1.1(i) and (ii) hereof. 11.1.8 Consent of the Members. Seller shall have furnished Buyer with a copy of the consent of the Members, authorizing Seller to execute and deliver this Agreement and the Seller Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereunder and thereunder, duly certified by the Manager of the Seller. 11.1.9 Incumbency. Seller shall have furnished the Buyer with a certificate of the Managers of Seller certifying as to the incumbency and specimen signatures of the Manager of the Seller executing the this Agreement and the Seller Ancillary Documents on behalf of such corporation. 11.1.10 Milk Supply Contract. The Buyer shall have entered into a milk supply contract with Snake River Dairymen's Association (the "Association"); provided that this condition shall be deemed satisfied if the Association is willing to enter into a contract with Buyer substantially similar to the contract that was negotiated and agreed to between Buyer and the Association on November 27, 2000. 11.1.11 Escrow Agreement. Buyer, Seller and Escrow Agent shall have entered into an escrow agreement with respect to the Physical Improvements Fund in a form reasonably satisfactory to Buyer and Seller and containing the provisions set forth in subparagraphs 10.3(iii), (iv) and (v) hereof. 11.2 Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction or written waiver by Seller, on or before the Closing Date, of each of the following conditions: 11.2.1 Representations, Warranties and Covenants. (i) Buyer shall have performed in all material respects each of the agreements and covenants made by it herein and required to be performed on or prior to the Closing Date; and (ii) The representations and warranties of Buyer contained herein shall be true, complete and correct at and as of the Closing Date, as if made at and as of such 25-

date (except that any representation and warranty made as of a specified date shall continue to be true, complete and correct on and as of such date). 11.2.2 Deliveries. Buyer shall have delivered or caused to be delivered to Seller, duly executed counterparts of each of the Buyer Ancillary Agreements. 12. Termination Prior to Closing. 12.1 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing: (i) by the mutual written consent of Seller and Buyer; (ii) by either Seller or Buyer if the Closing shall not have occurred on or before January 5, 2001, provided, however, that neither Seller nor Buyer may terminate this Agreement pursuant to this clause (ii) if the Closing shall not have been consummated within such time period by reason of the failure of the party electing to terminate this Agreement to perform in all material respects any of its covenants and agreements contained in this Agreement; (iii) by either Seller or Buyer if any Applicable Law shall be enacted that makes the purchase and sale of the Business and the Purchased Assets pursuant hereto illegal or otherwise prohibited; (iv) by either Seller or Buyer in the event that a judgment, injunction, decree, cease and desist order or other order issued by any Governmental Authority prohibiting or preventing the purchase and sale of the Business pursuant hereto shall be in effect and shall have become final and nonappealable; or (v) by Buyer if (a) a survey of the Real Property reveals a defect or other matter that has a Material Adverse Effect and Seller, within a reasonable time after notice from Buyer, fails to cure such defect or other matter; or (b) a deficiency or noncompliance exists with respect to a Permit that has a Material Adverse Effect or Buyer determines that Seller does not have one or more Permits required to maintain the Plant or operate the Business or the Purchased Assets and Seller, within a reasonable time after notice from Buyer, fails to cure such deficiency or noncompliance; provided, however, that the Buyer may only terminate this Agreement pursuant to this clause (v) on or prior to December 1, 2000. 12.2 Effect of Termination. Upon the termination of this Agreement in accordance with the terms hereof, it shall forthwith become void and of no further force and effect, except for the provisions of subparagraph 13.10 hereof; provided, however, that no such termination shall be deemed to relieve any party hereto of liability for its breach of any of the terms and provisions hereof. 26-

13. General Provisions. 13.1 Execution in Counterparts. This Agreement (A) may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document, and (B) shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to each of the other parties hereto. 13.2 Notices. All notices, requests, demands and other communications given hereunder shall be in writing and shall be deemed to have been duly given: (i) on the date of delivery, if delivered personally or by messenger, (ii) on the first business day following the date of timely deposit with Federal Express or other nationally recognized overnight courier service, if sent by such courier specifying next day delivery, (iii) upon receipt of confirmation of transmission, if transmitted by telecopier; and (iv) on the third business day after mailing, if mailed by registered or certified mail (postage prepaid, return receipt requested); provided, however, that a notice of change of address or telecopier number shall not be deemed to have been given until actually received by the addressee. All such notices, requests, demands and other communications shall be directed to the address or telecopier number set forth below or to such other address or telecopier number as any party hereto may designate to the other party hereto by like notice: If to Seller or the Members, to: Dairyland, Inc. 320 Memorial Drive Idaho Falls, Idaho 83401 Attn: Secretary Fax No.: 208-528-6636 Copy to: If to Buyer, to: Suprema Specialties Northwest Inc. 510 East 35th Street P.O. Box 280 Patterson, NJ 07543-0280 Attn: Steven Venechanos, CFO Copy to: Blank Rome Tenzer Greenblatt LLP 405 Lexington Avenue New York, New York 10174 Telecopier No. (212) 885-5001 Attn: Martin Luskin, Esq. 27-

13.3 Amendments. This Agreement may only be amended or modified by a written instrument executed by all of the parties hereto. 13.4 Entire Agreement. This Agreement, together with the Ancillary Agreements, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings among the parties hereto, oral and written, with respect to the subject matter hereof. 13.5 Applicable Law Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Idaho, without regard to the principles of conflicts of law thereof, and any action brought hereunder shall be brought exclusively in the Federal courts located in the State of Idaho or in the state courts located in Bonneville County, Idaho. With respect to any action brought hereunder in said courts, each party hereto (a) irrevocably waives any objection on the grounds of venue, forum non-conveniens or any similar grounds and (b) irrevocably consents to service of process in any manner permitted by applicable law and consents to the jurisdiction of said courts. 13.6 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the provisions of this Agreement. 13.7 Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto, by operation of law or otherwise, without the prior written consent of the other parties hereto, and any such purported assignment without such consent shall be null and void; provided, however, that Buyer may assign any or all of its rights, interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Buyer. Subject to the provisions of the immediately preceding sentence, this Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and permitted assigns. 13.8 Third Party Beneficiaries. Except as otherwise provided in subparagraphs 10.2, 10.3 and 10.4 hereof, nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 13.9 Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party against which enforcement of such waiver is sought; and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach. 28-

13.10 Expenses. Except as otherwise specifically provided in this Agreement or any of the Ancillary Agreements, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses, whether or not the transactions contemplated hereby are consummated. 13.11 Telefacsimile Execution. Delivery of an executed counterpart of this Agreement or any of the Ancillary Agreements by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement or any of the Ancillary Agreements. Any party delivering an executed counterpart of this Agreement or any of the Ancillary Agreements by telefacsimile also shall deliver an original executed counterpart of such instrument, but the failure to deliver an original executed counterpart thereof shall not affect the validity, enforceability or binding effect of this Agreement or any of the Ancillary Agreements. (SIGNATURES ON FOLLOWING PAGE) 29-

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first above written. BUYER: SUPREMA SPECIALTIES NORTHWEST INC. By: /s/ Mark Cocchiola ------------------------------------ Name: Mark Cocchiola Title: President SELLER: SNAKE RIVER CHEESE, L.L.C. By: Dairyland, Inc., its Manager By: /s/ Frank L. VanderSloot ------------------------------------ Name: Frank L. VanderSloot Title: President AGREED TO ACCEPTED BY WITH RESPECT TO SUBPARAGRAPH 6.10: MEMBERS: /s/ Frank L. VanderSloot ------------------------------ Frank L. VanderSloot Dairyland, Inc. By: Frank L. VanderSloot ------------------------- Name: Frank L. VanderSloot Title: President 30-

EXHIBIT A BILL OF SALE AND ASSIGNMENT Bill of Sale and Assignment, made by Snake River Cheese, L.L.C., an Idaho limited liability company ("Seller"), in favor of Suprema Specialties Northwest Inc., a Delaware corporation, or its designee ("Buyer"). WHEREAS, pursuant to the provisions of the Assets Purchase Agreement (the "Agreement"), dated as of November ___, 2000, by and between Seller and Buyer, Seller agreed to sell to Buyer, and Buyer agreed to purchase from Seller, the Purchased Assets (as defined in subparagraph 2.2 of the Agreement); and WHEREAS, in accordance with the foregoing, Seller is executing and delivering this Bill of Sale and Assignment to Buyer for the purpose of transferring to and vesting in Buyer all of the properties and assets (excluding the Real Property as defined in the Agreement) comprising the Purchased Assets; NOW, THEREFORE, in consideration of the covenants in the Agreement contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller hereby sells, conveys, transfers and assigns to, and vests in, Buyer, all of its right, title and interest in and to, all of the properties and assets (excluding the Real Property) comprising the Purchased Assets, free and clear of any and all liens, claims, charges or encumbrances of any nature whatsoever. TO HAVE AND TO HOLD all of the Purchased Assets (excluding the Real Property) unto Buyer, its successors and assigns, forever. Seller hereby irrevocably constitutes and appoints Buyer, its successors and assigns, its true and lawful attorney and attorneys, with full power of substitution, in its name and stead, but on behalf and for the benefit of Buyer, its successors and assigns, to demand and receive any and all of the Purchased Assets (excluding the Real Property), and to give receipts and releases for and in respect of the same, and any part thereof, and from time to time to prosecute in its name, or otherwise, for the benefit of Buyer, its successors and assigns, any and all proceedings at law, in equity or otherwise, which Buyer, its successors or assigns, may deem proper for the collection or reduction to possession of any of the properties or assets (excluding the Real Property) comprising the Purchased Assets or for the collection and enforcement of any claim or right of any kind hereby sold, conveyed, transferred and assigned, and to take all such other actions with respect to the Purchased Assets (excluding the Real Property) as Buyer, its successors or assigns, in its sole discretion, shall deem to be desirable in order to carry out the intent hereof.

IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be executed on its behalf by it duly authorized officer this ___ day of _________, ______. SNAKE RIVER CHEESE, L.L.C. By:__________________________ Name: Title: 32-

EXHIBIT B FIRST AMERICAN TITLE COMPANY OF EAST IDAHO, INC. ESCROW INSTRUCTIONS ORDER NO.: 843029 DATE OPENED: November 27, 2000 TO: FIRST AMERICAN TITLE COMPANY OF EAST IDAHO, INC. THE UNDERSIGNED, First American Title Company of East Idaho, Inc. (hereinafter referred to as First American), Snake River Cheese, L.L.C. ("Seller") and Suprema Specialties Northwest Inc. ("Buyer"), in consideration of the premises and the consent of First American, to act as holder of the escrow deposited herewith, (and as a neutral escrow depository pursuant to I.C. 54-2049) agree and represent as follows: Seller has agreed to sell, and Buyer has agreed to purchase, the Purchased Assets (as defined in the Purchase Agreement dated November 27, 2000 (the "Purchase Agreement"), between Buyer and Seller, a copy of which is attached hereto, for the consideration and under the terms as set forth therein and have concurrently handed you the sum of Three Hundred Thousand and 00/100 Dollars ($300,000.00) as the deposit described in the Purchase Agreement to hold said deposit under the terms and conditions of these instructions. You are hereby authorized and instructed to deposit said $300,000 with __________, into its ___________, with interest to be assessed and payable to Buyer or Seller, as the case may be, in accordance with the provisions hereof. 1. The account will read: First American Title Company, Trustee for Snake River Cheese, L.L.C. and Suprema Specialties Northwest Inc. 2. First American will not be held responsible for any loss of principal and/or interest in said account (collectively, the "Escrow Fund"), except if such loss is caused by First American's willful misconduct or gross negligence. 3. First American has not represented nor is it guaranteeing any interest or yield in said account. 4. Any fees or commissions of said deposit shall be paid 50% by Seller and 50% by Buyer. 5. If said funds have not previously been withdrawn and unless notified in writing to the contrary by both parties on or prior to January 5, 2001, First American shall

close said account and disburse the Escrow Fund into its general trust account to be held pursuant to these instructions. You are hereby authorized and instructed to hold the Escrow Fund until happening of the following events, whichever first occurs: A. If on or before January 5, 2001, First American receives a notice signed by Buyer and Seller stating that the Closing (as defined in the Purchase Agreement) has occurred, First American shall deliver the Escrow Fund (less the Indemnification Fund) to Seller in accordance with such notice from Buyer. B. If on or after January 5, 2001, First American receives a notice signed by Seller stating that the conditions to Closing set forth in the Purchase Agreement have not been satisfied (solely by reason of Buyer's failure to perform its covenants and agreements thereunder in all material respects), First American shall provide a copy of such notice to Buyer and, unless First American has received an objection from Buyer no later than ten (10) days after the date such notice was given to Buyer, First American shall deliver the Escrow Fund to Seller in accordance with such notice from Seller. C. If First American receives a notice signed by Buyer stating that the Purchase Agreement was terminated for any reason other than Buyer's failure to perform it covenants and agreements under the Purchase Agreement in all material respects and the Closing has not occurred, First American shall provide a copy of such notice to Seller and, unless First American has received an objection from Seller no later than ten (10) days after the date such notice was given to Seller, First American shall deliver the Escrow Fund to Buyer in accordance with such notice from Buyer. and each event, you are hereby authorized and instructed to pay over such funds after first deducting additional fees and costs of the escrow, if any. The parties to these instructions have instructed First American where and how to deposit said funds. They thus agree that First American has no liability for loss of funds caused by the deposits being placed in the account or investment designated by the parties. First American shall not be liable for any business failure of the depository or institution holding such deposits, or investment. The parties acknowledge that the placement of the funds is being directed by the parties based upon independent advice and not from any recommendation of First American or its employees. The parties further agree that any loss caused by the deposit being placed in the designated account or investment is the responsibility of the parties; and if additional funds are required to complete the escrow by reason of the loss of the funds, the parties assume responsibility and agree to provide the funds. The parties and each of them agree to hold First American harmless from any costs, expenses, attorneys' fees or other loss which may arise by reason of the designation. It is expressly understood among the parties hereto that First American shall not be responsible or liable in any manner whatsoever for the sufficiency of any deposit in this escrow, nor as to the identity, authority or rights of any person executing the same; also that First

American assumes no responsibility, nor is it to be held liable as to the condition of the title to any of the property affected hereby, nor as to any assignments, liens, or encumbrances, against said deposit or property; and that its duties hereunder shall be limited to the safekeeping of such money consistent with these instructions and for the delivery of the same; it is further agreed that First American shall in no case or event be liable for the failure of any of the conditions of this escrow or damage or loss caused by the exercise of First American's discretion in any particular manner, or for any other reasons, except gross negligence or willful misconduct with reference to the escrow. If any dispute among the parties hereto by reason of the terms and conditions hereof results in adverse claims and demands by Seller or Buyer against First American, First American shall be entitled, at its option, to refuse to comply with said demands so long as such dispute shall continue; and in so refusing, First American may refuse to deliver any monies involved in or affected by this escrow and in so refusing, First American shall not be or become liable to the Buyer or Seller for First American's failure and/or refusal to comply with the conflicting or adverse demands of the such party. Further, First American shall be entitled to continue to so refrain to act until: (a) Buyer and Seller have reached an agreement resolving their differences and shall have notified First American in writing of such agreement, or (b) the rights of the parties have been duly adjudicated by a court of competent jurisdiction. In the event that First American shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from either Buyer or Seller which, in its opinion, conflict with any of the provisions of this Escrow Agreement or with instructions received from the other of Buyer or Seller, as the case may be, First American shall be entitled to refrain from taking any action and its sole obligation shall be (i) to keep safely all Escrow Funds held in escrow until it shall be directed otherwise by an order or judgment of a court of competent jurisdiction or (ii) to deliver the Escrow Funds to a court of competent jurisdiction and commence an action for interpleader or its equivalent. The costs of the foregoing shall be borne by whichever of Buyer or Seller is the losing party. If any dispute among the parties hereto by reason of the terms and conditions hereof results in adverse claims and demands by Seller or Buyer or by any other party against First American, First American shall have the right to employ legal counsel to advise it and/or to represent it in any suit or action, including an action in interpleader brought affecting this escrow and the Buyer and Seller shall be jointly and severally liable to First American for any and all attorneys' fees, costs, and disbursements incurred by First American in connection herewith, and upon demand shall forthwith pay the same. First American shall have a lien upon all monies, held in connection herewith for any fees, costs, expenses or disbursements incurred. The parties acknowledge that they have been specifically informed that First American is not licensed to practice law and no legal advice has been offered by First American or any of its employees and have been further informed that First American is acting only as 35-

escrow holder and that it is forbidden by law from offering any advice to any party respecting the merits of this escrow transaction or the nature of the instruments utilized, and that it has not done so. The parties acknowledge that they have not been referred by First American to any named attorney or attorneys or discouraged from seeking advice of any attorney, but have been requested to seek legal counsel of their own choosing at their own expense, if they have doubt concerning any aspect of this transaction . The parties understand and acknowledge that (i) First American is a title insurance company agent for First American Title Insurance Company and in the primary business of insuring land titles and (ii) simultaneously with the execution of these instructions, First American shall issue a title commitment to insure title to the real property described in the Purchase Agreement and in the manner more particularly described in said commitment. Any amendments of and/or supplement to any instructions contained herein must be in writing and accepted by First American. If there is any conflict or inconsistency between the provisions of these instructions and the provisions of the attached Agreement these instructions shall prevail to the extent of any inconsistency. Notices or other written communications placed in the United States mail, postage prepaid and addressed to the undersigned, or any of them, at their or his post office address, shall be deemed to have been given to them or him on the date of mailing. [Signature page to follow] 36-

BUYER: SUPREMA SPECIALTIES NORTHWEST INC. By: ------------------------------------------------------ SSN# ---------------------------------- SELLER: SNAKE RIVER CHEESE, L.L.C. By: ----------------------------------------- SSN# --------------------------------------- Accepted by: FIRST AMERICAN TITLE COMPANY OF EAST IDAHO, INC. By:__________________________ Name: Title: 37-

Exhibit C FORM OF OPINION 1. The Company is a limited liability company duly organized and validly existing in good standing under the laws of the State of Idaho with all requisite power and authority to execute, deliver, and perform its obligations under the Transaction Documents, to carry on its business as now conducted, and to own its property and assets, including, without limitation, the Purchased Assets. The Company has no subsidiaries. 2. To the best of our knowledge, each of Frank L. VanderSloot and Gary Seamons is an individual with the requisite capacity, to execute, deliver and perform his obligations under the Transaction Documents to which he is a party. Dairyland, Inc. is an Idaho corporation with the requisite corporate authority to execute, deliver and perform its obligations under the Transaction Documents to which it is a party. 3. The execution and delivery of the Transaction Documents, and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary action on the part of the Company. The Transaction Documents have been duly executed and delivered by the Company, and are valid and binding benefits and obligations of the Company enforceable by and against the Company, as the case may be, in accordance with their respective terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws or court decisions relating to or affecting the enforcement of creditors' rights generally. 4. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party will not (i) violate or conflict with any term of either the Articles of Organization or Operating Agreement of the Company; or (ii) violate or, alone or with the passage of time, result in the breach or termination of, or otherwise (with or without the giving of notice or the passage of time or both) entitle any party to terminate or declare a default under any agreement to which the Company is a party or by which it is bound, or to which any of the Company's properties, assets or businesses are subject; or (iii) violate any judgment, order, injunction, decree or award binding upon the Company or the business or assets of the Company. 5. There is no (i) claim, suit, action, arbitration or legal, administrative or other proceeding or governmental investigation or tax audit, pending or threatened against or related to the Company or (ii) judgment, order, injunction or decree of any court, governmental authority or regulatory agency, to which either the Company or any Member is subject, which might adversely affect or restrict the ability of the Company to consummate the transactions in the manner contemplated by the Transaction Documents or have an adverse effect on the Company. 6. Except as provided in the Schedules to the Purchase Agreement, no consent, approval or 38-

authorization of or by, or any designation, declaration, filing, registration, or qualification with any governmental authority is required in connection with the execution, delivery and performance of the Company's obligations under the Transaction Documents. 39-

SCHEDULES TO ASSET PURCHASE AGREEMENT Schedule 2.2(i) - Tangible Property 1. The personal property listed on the appraisal commissioned by Buyer. Schedule 2.2(ii) - Real Property 1. The land described in Schedule A.4 of the title report and all buildings and improvements located thereon. Schedule 2.2(iv) - Permits 1. Wastewater-Land Application Permit, LA-000084-03, Idaho Division of Environmental Quality. 2. City of Blackfoot Industrial Wastewater Acceptance Permit dated October 12, 2000. Schedule 2.5.2 - Allocation Statement The Cash Purchase Price shall be allocated $1.5 million to the land, buildings and improvements and $4.5 million to the equipment. Schedule 4.3 - List of Members The Members of Snake River Cheese LLC are: Dairyland, Inc., an Idaho corporation (Managing Member) Frank VanderSloot, and individual (Member) Gary Seamons, an individual (Member) Schedule 4.10 - Consents 1. The consent of the Idaho Department of Environmental Quality will be required for the assignment to Buyer of the Wastewater Land Application Permit, LA-000084-03. Schedule 4.11 - Exceptions to Permits 1. Letter from Idaho DEQ dated September 12, 2000 regarding Permit LA-000084-03. Schedule 4.12 - Exceptions to Applicable Laws and Permits 1. Letter from Idaho DEQ dated September 12, 2000 regarding Permit LA-000084-03. Schedule 4.13(i) - Storage Tanks 1. Underground storage tanks identified in paragraph 6.2.4, and aboveground storage tanks identified in paragraph 6.2.5 of the Phase I Site Environmental Assessment prepared for Kraft General Foods by Triad Engineering Incorporate, dated March 1994. Schedule 4.13(ii) - Potentially Responsible Party Notices None Schedule 4.13(iii) - Environmental Reports 1. Phase I Site Environmental Assessment prepared for Kraft General Foods by Triad Engineering Incorporated, dated March 1994.

2. All environmental reports with respect to the Purchased Assets obtained by Buyer. Schedule 4.15 - Employee Plans None, other than the company vacation policy and insurance benefits. Schedule 4.16 - Insurance Policies 1. $45,000,000 comprehensive all risk property and casualty policy issued by ACE American Insurance Co. to ConAgra, Inc. - Beatrice Cheese naming Snake River Cheese LLC as Additional Insured. Schedule 4.24 - Title Report 1. Commitment for Title Insurance issued to Seller by First American Title Insurance Company dated November 7, 2000 at 7:30 A.M., Order No., B43029. Schedule 6.12 - Description of Optioned Property The land, together with all buildings and improvements thereon, described as follows: Lots 11 through 16, Block 41, Danielson's Addition to the City of Blackfoot, Bingham County, Idaho, as shown on the recorded plat thereof. TOGETHER WITH all and singular the tenements, hereditaments, and appurtenances thereunto belonging or in anywise appertaining, including all water, water rights, ditch and ditch rights. Schedule 11.1.5 - Exceptions to Title 1. Exceptions 1, 2, 3, 4, 5, 7, 8 and 9 of Schedule B - Section 2 of the Title Report. 41-

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Master Lease Agreement
Lease No. 2557

THIS MASTER LEASE AGREEMENT ("Lease") is made this 28th day of December, 2000,
by and between PNC LEASING. LLC ("Lessor"), a subsidiary of PNC Bank, National
Association (the "Bank"), with an address at Two PNC Plaza, 13th Floor, 620
Liberty Avenue, Pittsburgh, Pennsylvania 15222-2719, and SUPREMA SPECIALTIES
NORTHWEST, INC. ("Lessee"), with its principal place of business at 510 East
35th Street, Paterson, New Jersey 07543-0280.

     1    LEASE AGREEMENT. Lessor hereby leases to Lessee, and Lessee hereby
rents from Lessor, all the machinery, equipment and other personal property
(individually an "Item of Equipment" and collectively the "Equipment") described
in Schedules of Leased Equipment which may be executed by Lessor and Lessee and
attached hereto or incorporated herein by reference ("Schedules"). "Equipment"
shall mean the Equipment described in a specific Schedule, unless the context
clearly indicates otherwise. The disposition of any rights or obligations of
either party under this Lease in conjunction with any Schedule shall not affect
the rights and/or obligations with either party under any other Schedule, so
long as Lessee is not in default under this Lease or any Schedule beyond any
applicable cure period. In the event of any such default by Lessee beyond any
applicable cure period, Lessor may declare this Lease and any Schedule to be in
default hereunder and Lessor may proceed with its remedies against Lessee in
accordance with paragraph 24 herein, with respect to any particular Schedule or
all Schedules. The terms of this Lease are also modified by any one or more
Supplements which are attached to and which make reference to this Lease (a
"Supplement"). A Supplement contains terms and conditions applicable to the type
of equipment leasing product described therein. An executed counterpart of this
Lease (including any Schedules, Supplements, amendments, addenda or riders
thereto) or a photocopy thereof, together with an executed original of any
numbered Schedule (marked "Lessor," if more than one counterpart of such
Schedule is executed), shall be the original "lease" for the Equipment described
in such Schedule and together they shall constitute a separate and enforceable
lease. All other executed counterparts (if any) shall be marked and considered a
"Duplicate". Facsimiles will be considered "originals" upon receipt and
countersignature by Lessor for all evidentiary purposes including any
requirement of a "writing" under applicable Statute of Frauds provisions. To the
extent this Lease constitutes chattel paper, as that term is defined in the
Uniform Commercial Code as adopted and in effect in the Commonwealth of
Pennsylvania ("UCC"), no security interest in the Lease may be created through
the transfer of possession of any counterpart other than Lessor's counterpart of
the numbered Schedule.

     2    TERM. The obligations under this Lease begin with Lessor's written
acceptance and shall end upon full performance and observance of all terms,
conditions and covenants of the Lease and any extensions. The rental term for
Equipment begins on the date indicated on the related Schedule and shall end on
the last day of the term stated in such Schedule. Lessee may not terminate the
Lease or any Schedule prior to the last day of the term except as otherwise
provided in such Schedule. Any interim rental term shall be set forth in any
such Schedule.

     3    RENT. The rent, including interim rental payments, for the Equipment
shall be the amount stated in the applicable Schedule (the "Rent"). Rent is an
absolute obligation of


Lessee due as specified in each applicable Schedule irrespective of any claims, demands, set-offs, actions, suits or proceedings that Lessee may have or assert against Lessor or any vendor of Equipment. Rent shall be payable to Lessor at P.O. Box 640306, Pittsburgh, PA 15264-0306, or at such other place as Lessor or its assigns may designate in writing to Lessee. 4 DELINQUENT RENT PENALTY. If any Rent or other amount due is not paid when due for ten (10) days following receipt of Lessor's invoice, Lessee agrees to pay a delinquent rent penalty of three percent (3%) on the amount of such Rent or other amount due, but not exceeding the lawful maximum, if any. Delinquent interest at a rate per annum equal to the Bank's prime rate shall be payable on demand with respect to all such delinquent amounts. Interest shall accrue whether or not judgment has been entered. 5 ADVANCES. Before the beginning date of the base lease term, Lessor may in its sole discretion make such advances, deposits and reimbursements as may be required for purchase of the Equipment. Before Lessor makes any advance, Lessee agrees to sign and deliver a Progress Payment Addendum and any other documents Lessor may reasonably request, such as certified resolutions, incumbency certificates or other evidence of authority and opinions of counsel in form and substance reasonably satisfactory to Lessor. 6 DELIVERY AND INSTALLATION. Lessee will select the Equipment and the supplier, and in reliance thereon, Lessor will order the Equipment, or Lessor may, at its option, accept from Lessee an assignment of any existing purchase order. Lessor shall not be liable for loss or damage for any reason, such as failure of or delay in delivery, delivery to wrong location, delivery of improper equipment or property other than the Equipment, defects in or damage to the Equipment, governmental regulations, strikes, embargoes or other causes, circumstances or events. If the cost of any Item of Equipment differs from the price set forth in the purchase order, the periodic rental shall be changed to fully reflect any such difference. 7 WARRANTY OF LESSEE'S QUIET POSSESSION. Lessor covenants, subject to the disclaimer of warranties set forth immediately below, that so long as Lessee faithfully performs this Lease, Lessee may quietly possess and use the Equipment without interference by Lessor, or by any party claiming by or through Lessor. 8 DISCLAIMER OF WARRANTIES. LESSEE ACKNOWLEDGES AND AGREES THAT (i) THE EQUIPMENT AND EACH PART THEREOF IS OF A SIZE, DESIGN, CAPACITY, AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT THE EQUIPMENT AND EACH PART THEREOF IS SUITABLE FOR ITS RESPECTIVE PURPOSE, (iii) LESSOR IS NOT A MERCHANT, MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE EQUIPMENT AND EACH PART THEREOF IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN THE STATE AND CONDITION WHEN THE SAME FIRST BECAME SUBJECT TO TIES LEASE, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY LESSOR AND (v) LESSOR LEASES THE EQUIPMENT, AS IS, WITHOUT WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO (A) THE CONDITION, FITNESS, DESIGN, QUALITY, CAPACITY,

WORKMANSHIP, OPERATION, AND MERCHANTABILITY OF THE EQUIPMENT, (B) LESSOR'S TITLE THERETO, OR (C) ANY OTHER MATTER WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE, AND THE BENEFITS OF ANY AND ALL IMPLIED WARRANTIES AND REPRESENTATIONS OF LESSOR ARE HEREBY WAIVED BY LESSEE. Lessor is not responsible or liable for any direct, indirect, incidental, or consequential damage to, or loss resulting from, the installation, operation, or use of the Equipment or any product manufactured thereby. Lessee's recourse for breach of any representation or warranty of the vendor or supplier is limited to such vendor or supplier. Lessee will be subrogated to Lessor's claims, if any, against the manufacturer or supplier of the Equipment for breach of any warranty or representation and, upon written request from Lessee, Lessor shall take all reasonable action requested by Lessee to enforce any such warranty, express or implied, applicable to any of the Equipment, which is enforceable by Lessor in its own name, provided, however, that (a) Lessee is not in default and (b) Lessor shall not be obligated to resort to litigation to enforce any such warranty unless Lessee shall pay all expenses in connection therewith. Notwithstanding the foregoing, Lessee's obligations to pay the rentals or otherwise under this Lease shall be and are absolute and unconditional. All proceeds of any such warranty recovery from the manufacturer or supplier of the Equipment shall first be used to repair the affected Equipment 9 NATURE OF EQUIPMENT. The Equipment shall remain personal property even if it is affixed to any real property. Lessee shall obtain and cause to be recorded, where appropriate, at its own expense, from each landlord, owner, mortgagee or any person or entity having an encumbrance or lien upon the real property where any of the Equipment is located, a waiver of any lien, encumbrance or interest which such third party might have or hereafter obtain or claim with respect to the Equipment. Lessee, at its expense, will protect and defend Lessor's title to the Equipment and will do everything required to keep the Equipment free and clear of all claims, levies, liens and encumbrances. Lessor assumes no liability and makes no representation as to the treatment by Lessee of this Lease, the Equipment, or the rental payments for financial accounting or tax purposes. 10 LESSOR'S RIGHT OF INSPECTION. Lessor, or its authorized agents, shall have the right during normal business hours to enter upon the premises where the Equipment is located for the purpose of inspection. Provided no Event of Default has occurred and is continuing, Lessor shall provide Lessee prior notice of such inspection. 11 USE OF EQUIPMENT. Lessee represents that it is leasing the Equipment for a business or commercial purpose and not for personal, family or household use. Lessee must use the Equipment in a careful and proper manner in conformity with (i) all statutes and regulations of each governmental authority having jurisdiction over Lessee and/or the Equipment and its use, and (ii) all policies of insurance relating to the Equipment and/or its use. In addition, Lessee shall not (i) use the Equipment in any manner that would impair the applicability of manufacturer's warranties or render the Equipment unfit for its originally intended use; (ii) permit anyone other than authorized and competent personnel to operate the Equipment; nor (iii) terminate the use of the Equipment prior to the last day of the term indicated in the applicable Schedule except as otherwise expressly provided for in this Agreement.

12 ALTERATIONS. Without Lessor's prior written consent, Lessee may only make alterations, modifications or attachments to the Equipment which maintain or improve its economic value, economic and useful life, or functional utility. To the extent alterations, modifications and attachments made to the Equipment are not removed upon the termination of the Lease, they shall automatically become Lessor's property. Under no circumstances shall any such alteration, modification or attachment be subject to third party financing or encumbered by Lessee or result in the creation of a mechanic's or materialman's lien, except as may arise by operation of law pending payment within ordinary business terms. 13 MAINTENANCE AND REPAIRS. At its expense Lessee shall maintain, operate, repair and make all modifications to the Equipment in accordance with good industry practice, manufacturer's warranty requirements and specifications and Lessee's established operation, maintenance and repair programs, without discrimination as to leased equipment, so as to keep the Equipment in good working order for commercial purposes, and so as to comply with all applicable laws, regulations or governmental actions and so as not to incur liability (whether or not there is a lack of compliance) under any environmental law or otherwise account for any release of, or exposure to, any hazardous material. Lessor shall not be required to maintain, repair or replace the Equipment or part thereto and Lessee hereby waives the right, however arising, to (i) require Lessor to maintain, repair or replace any of the Equipment or part thereto, or (ii) make repairs at Lessor's expense pursuant to any applicable law. Lessor may, upon reasonable advance notice to Lessee, review Lessee's established operating procedures and maintenance records to assure compliance with this section. Upon installation, title to replacement parts shall pass to Lessor, and be deemed part of the Equipment. 14 RISK OF LOSS, DAMAGE AND THEFT. A. Lessee will bear all risk of loss, damage, theft or destruction, partial or complete, to the Equipment from and after delivery of the Equipment to a carrier FOB point of origin, whether the terms of shipment require or authorize the Equipment to be shipped by carrier, to be delivered to Lessee's place or places of business, or provide that Lessee accept possession of or title to the Equipment at any other location. Lessee shall promptly notify Lessor of any theft of or loss or material damage to the Equipment B. Neither total nor partial loss of use or possession of the Equipment shall abate the rent. C. The Equipment shall be deemed subjected to total loss (i) if it has disappeared regardless of the reason for disappearance or (ii) if it has sustained physical damage and the estimated cost of repair exceeds 75% of its fair market value on the date of damage. Lessee's duty to pay Rent for the Equipment subjected to total loss shall be discharged by paying to Lessor, on demand, ail accrued but unpaid Rent for such Equipment as of the date of disappearance or damage, plus the greater of: (i) Lessor's book value of the Equipment, which shall be deemed to be the Equipment's cost as set forth in the applicable Schedule minus straight-line depreciation based on recognized physical life prorated to the date of disappearance or damage, or (ii) the fair market value of the Equipment as of the date of disappearance or damage. The amount of applicable

insurance proceeds, if any, actually received by Lessor shall be subtracted from the amount for which Lessee is liable under this paragraph 14. D. Lessee shall cause the Equipment subjected to partial loss to be restored to original capability. Lessor shall, as such restoration proceeds upon terms and conditions reasonably acceptable to Lessor, pay to Lessee the proceeds of any insurance or compensation received by Lessor, by reason of such partial loss. E. Lessor shall not be obligated to undertake the collection of any claim against any person for either total or partial loss of the Equipment. After Lessee discharges its obligations to Lessor under either paragraph 14(c) or 14(d) above, Lessee may, for Lessee's own account, proceed to recover from third parties and shall be entitled to retain any amount recovered. Lessor shall supply Lessee with any necessary assignment of claim. 15 INDEMNIFICATION. A. Non-Tax Liability. Lessee agrees to indemnify each of Lessor, its directors, officers and employees and each legal entity, if any, who controls Lessor (the "Indemnified Parties") and to hold each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities and expenses (including all reasonable fees and charges of internal or external counsel with whom any Indemnified Party may consult and all reasonable expenses of litigation or preparation therefor) which any indemnified Parry may incur or which may be asserted against any Indemnified Party in connection with or arising out of the Lease or any related document by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf of Lessee), whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by Lessee, (b) the manufacture, installation, use, condition (including, but not limited to, latent and other defects and whether or not discoverable by Lessee or Lessor), operation, ownership, selection, delivery, leasing, removal or return of the Equipment, regardless of where, how and by whom operated, or (c) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority, which arises out of or relates to the Lease or any related document; provided, however, that the foregoing indemnity agreement shall not apply to claims, damages, losses, liabilities and expenses to the extent attributable to an Indemnified Party's gross negligence or willful misconduct. The indemnity agreement contained in this Section shall survive the termination of this Lease, payment of any amounts due and assignment of any rights hereunder. Lessee may participate at its expense in the defense of any such action or claim. B. Direct Tax Costs. Lessee agrees to indemnify, protect, and hold harmless each Indemnified Party, from and against any and all taxes, license fees, assessments and other governmental charges, fees, fines or penalties of whatsoever kind or character and by whomsoever payable, which are levied, assessed, imposed or incurred during the lease

term, (i) on or relating to the Equipment, including any tax on the sale, ownership, use, leasing, shipment, transportation, delivery or operation thereof, (ii) on the exercise of any option, election or performance of any obligation by Lessee hereunder, (iii) of the kind generally referred to in items (i) and (ii) above which may remain unpaid as of the date of delivery of the Equipment to Lessee irrespective of when the same may have been levied, assessed, imposed or incurred, and (iv) by reason of all gross receipts and like taxes on or measured by Rents payable hereunder levied by any state or local taxing authority having jurisdiction where the Equipment is located. Lessee agrees to comply with all state and local laws requiring the filing of ad valorem tax returns relating to the Equipment. Any statements for taxes received by Lessor shall be promptly forwarded to Lessee. This subparagraph shall not be deemed to obligate Lessee to pay (i) any taxes, fees, assessments and charges which may have been included in Lessor's cost of the Equipment as set forth in Schedule(s) hereto, or (ii) any income or like taxes against Lessor on or measured by the net income from the Rents payable hereunder. Lessee shall not be obligated to pay any amount under this subparagraph so long as it shall, at its expense and in good faith and by appropriate proceedings, contest the validity or the amount thereof unless such contest would adversely affect the title of Lessor to the Equipment or would subject the Equipment to forfeiture or sale. Lessee agrees to indemnify each Indemnified Party against any loss, claim, demand and expense including reasonable legal expense resulting from such nonpayment or contest. C. Indemnity Payment. The amount payable pursuant to subparagraphs 15(a) and 15(b) shall be payable upon demand of Lessor accompanied by a statement describing in reasonable detail such loss, liability, injury, claim, expense or tax and setting forth the computation of the amount so payable and such other information as Lessee may reasonably request. D. Survival. The indemnities and assumptions of liabilities and obligations of this paragraph 15 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease. 16 LESSEE'S ASSIGNMENT. Without Lessor's prior written consent, Lessee shall not assign, bail, sublease, hypothecate, transfer or dispose of the Equipment or any interest in this Lease nor impair Lessor's title to the Equipment. No assignment, whether or not with Lessor's consent, shall release Lessee or any guarantor from any of its respective obligations or otherwise materially adversely affect an-, rights or remedies of Lessor under the Lease. Any attempted assignment without Lessor's written consent shall be void and of no effect. Lessee shall not assign this Lease, nor shall this Lease or any rights under this Lease or in the Equipment inure to the benefit of any trustee in bankruptcy, receiver, creditor, or other successor of Lessee whether by operation of law or otherwise. Notwithstanding the foregoing. Lessee may, without Lessor's prior consent, replace all or any portion of the Equipment, provided that the value of the replacement equipment is equal to or greater than the value of the replaced Equipment. 17 LESSOR'S ASSIGNMENT. All rights of Lessor hereunder in the Rents and in the Equipment may be assigned, pledged, mortgaged, transferred, or otherwise disposed of,

either in whole or in part, following notice to Lessee. No such assignee shall be obligated to perform any duty, covenant, or condition required to be performed by Lessor under the terms of this Lease unless such assignee expressly assumes such obligations. Lessor shall remain liable to Lessee hereunder to perform such duty, covenant, and condition unless such assignee expressly assumes Lessor's obligations, in which event Lessee hereby releases Lessor from such obligations. Such assignee shall have all rights, powers and remedies given to Lessor by this Lease, and shall be named as lender loss payee or co-insured under all policies of insurance maintained pursuant to paragraph 18 hereof. If Lessor assigns this Lease or the monies due or to become due hereunder or any other interest herein, Lessee agrees not to assert against Lessor's assignee any defense, set-off, recoupment, claim or counterclaim which Lessee may have against Lessor, whether arising under this Lease or any other transaction between Lessor and Lessee. Subject to paragraph 16 hereof and this paragraph 17, this Lease inures to the benefit of, and is binding upon the heirs, personal representatives, successors and assigns of the parties hereto. 18 INSURANCE. Lessee will at its own expense insure the Equipment in compliance with the terms and conditions of the applicable Supplement, in form, in an amount and subject to deductibles as are commercially reasonable in Lessor's good faith judgment, with insurance carriers reasonably approved by Lessor. The proceeds of any insurance claim due to the theft or loss of or damage to the Equipment shall be applied as provided in paragraph 14 hereof In addition to the compliance with the terms and conditions of the applicable Supplement and the other terms and conditions of this paragraph 18, Lessee shall comply with the following conditions: A. Lessee, prior to the inception of the term, shall deliver to Lessor all required policies of insurance or other proper binding evidence of insurance, which shall be sufficiently detailed to advise Lessor of all types of coverage and inclusions; B. Lessee shall cause each insurer to agree by endorsement to the policies that each insurer will give at minimum thirty (30) days' written notice to Lessor before any policy will be altered or cancelled for any reason, including Lessee's failure to pay premiums; C. All coverage must be in effect upon delivery, or when Lessee assumes the risk of loss, whichever is earlier, and will provide coverage without geographic limitation; D. All policies must provide that Lessor is an additional insured for all aspects of general liability insurance, and is lender loss payee for all aspects of insurance relating to the theft or loss of or damage to the Equipment; E. Lessee will famish renewal policies or renewal evidence of insurance listing Lessor as an additional insured and lender loss payee, as required by this Lease, no later than thirty (30) days prior to the expiration of any insurance required hereby; F. Lessee appoints Lessor its attorney-in-fact to apply any insurance proceeds received with respect to the Equipment in accordance with this Agreement.

19 ADDITIONAL DOCUMENTS. If Lessor shall so request, Lessee shall execute and deliver to Lessor such documents, including UCC financing, amendment and continuation statements, as Lessor shall, in its reasonable judgment, deem necessary or desirable for purposes of continuing this Lease or recording or filing to protect the interest of Lessor in the Equipment. By its signature hereon, Lessee hereby authorizes Lessor to execute and file against Lessee any such UCC financing, amendment and continuation statements. Any such filing or recording shall not be deemed evidence of any intent to create a security interest. All filing fees and expenses shall be borne by Lessee. 20 FURNISHING FINANCIAL INFORMATION. During the term of this Lease and any extensions or renewals hereof, Lessee will furnish to Lessor: A. As soon as available, but in any event within ninety (90) days after the last day of each of its fiscal year ends, the Form 10-K report of Suprema Specialties, Inc. (the "Parent") and its subsidiaries, including Lessee, Suprema Specialties West, Inc., and Suprema Specialties Northeast, Inc. (collectively, the "Subsidiaries") as at the end of such fiscal year and statements of income and retained earnings and cash flows for such fiscal year, each prepared in accordance with GAAP and audited by a firm of independent certified public accountants reasonably satisfactory to the Lessor (with such audit to be accompanied by an unqualified opinion of such independent certified public accountant (other than immaterial qualifications) without limitation as to the scope of such audit), together with management prepared consolidated and consolidating balance sheets. Management shall provide an itemized statement of capitalized expenses, which shall be broken out on the management balance sheet, and any expenses related thereto shall be itemized on the management income statement. Management shall also provide a breakdown of selling, general and administrative expenses. Notwithstanding the foregoing, if the Parent has been granted an extension from filing its Form 10-K report by the Securities and Exchange Commission, then the reports required hereunder shall be due simultaneously with the filing thereof, but in no event later than one hundred ten (110) days from the last day of its fiscal year. B. As soon as available, but in any event within forty-five (45) days after the close of each of the first three quarters of each fiscal year, Form I O-Q report and management prepared consolidated and consolidating balance sheets, statements of income and retained earnings and cash flows of the Parent and the Subsidiaries as of the last day of and for such quarter and for the period of the fiscal year ended as of the close of the particular quarter, all such quarterly statements to be certified by the chief financial or accounting officer of the Parent as having been prepared in accordance with GAAP (subject to year-end adjustments and other exceptions specified therein). Management shall provide an itemized statement of capitalized expenses, which shall be broken out on the prepared balance sheet, and any expenses related thereto shall be itemized on the prepared income statement. Management shall also provide a breakdown of selling. general and administrative expenses. Notwithstanding the foregoing, if the Parent has been granted an extension from filing its Form 10Q report by the Securities and Exchange Commission, then the reports required hereunder shall be due simultaneously

with the filing thereof, but in no event later than fifty (50) days from the last day of its fiscal year. All such financial statements required by this paragraph 20 (the "Financial Statements") are to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except (i) as approved by such accountants or the chief financial officer of the Parent, as the case may be, and disclosed therein and (ii) with respect to any interim statements which may not include all disclosure required by GAAP). C. At the same time as Lessee delivers the financial statements called for by subparagraphs (a) and (b) above, the Parent shall deliver to Lessor the certificate of its chief financial officer as called for in Section 10.2 of the Syndicated Revolving Credit Facility, as that agreement is defined in paragraph 21 below, as the same may be amended from time to time. 21 INCORPORATION OF COVENANTS BY REFERENCE. Any and all affirmative, negative and financial covenants which may be set forth in any credit agreement, loan agreement, promissory note, guaranty or other agreement, instrument or document entered into between Lessee (or any of its affiliates) as borrower and any affiliate of Lessor, as lender (whether directly as a lender to Lessee or as one lender in a bank syndicate agreeing to lend to Lessee, or as holder of a participation in a loan by another lender to Lessee), including, without limitation, that certain Third Amended Restated Revolving Loan, Guaranty and Security Agreement dated September 23, 1999, between Lessee and Fleet National Bank, et al. (the "Syndicated Revolving Credit Facility") (the "Loan Documents"), are hereby incorporated herein by this reference as if set forth herein at length, as any of the foregoing may be amended or supplemented from time to time (the "Incorporated Provisions"). Any amendments, modifications, waivers or other changes in the terms of any of the Incorporated Provisions shall automatically constitute an amendment to this Lease without any need for further action or documentation. Notwithstanding the foregoing, any such changes to any Incorporated Provision which operate to waive or prevent the occurrence of a default or Event of Default under any Loan Document shall not be effective unless consented to in writing by Lessor in its sole discretion. If any Loan Document terminates or otherwise ceases to be in full force and effect (a "Termination"), all of the Incorporated Provisions of such Loan Document shall survive the Termination and shall continue in full force and effect as a part of this Lease. At any time after a Termination, Lessee shall promptly upon Lessor's request execute and deliver to Lessor an amendment to this Lease, which amendment will expressly incorporate into this Lease all or any number of the Incorporated Provisions of the terminated Loan Document as Lessor in its sole discretion shall select, as such Incorporated Provisions are in effect immediately prior to the date of Termination. 22 PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR. If Lessee fails to promptly perform any of its obligations (other than payment obligations) under this Lease for more than thirty (30) days following notice from Lessor, Lessor may perform the same for the account of Lessee without waiving Lessee's failure as a default All sums paid or expense or liability incurred by Lessor in such performance (including reasonable legal fees) together with interest thereon at the highest contract rate enforceable against Lessee. but never at a higher rate

than fifteen percent (15%) per annum simple interest, shall be payable by Lessee upon demand as additional rent. 23 EVENTS OF DEFAULT. Any of the following events or conditions shall constitute an event of default ("Event of Default") hereunder and entitle Lessor, at its option, to avail itself of the remedies more fully set forth in paragraph 24 hereof: A. Non-payment by Lessee of any Rent or other amount provided for in this Lease when due, which continues for a period of ten (10) days following the date of invoicing from Lessor; B. Lessee shall (i) fail to perform any covenant or requirement relating to insurance or environmental matters; (ii) fail to keep the Equipment free and clear of any claims, levies, liens and encumbrances; (iii) fail to prevent the Equipment from being subjected to a foreclosure or forfeiture proceeding, execution or attachment; or (iv) terminate the Lease or any Schedule prior to the last day of the term; C. Death or judicial declaration of incompetency of Lessee, if an individual, or death or judicial declaration of incompetency of an individual partner or member, if Lessee is a partnership or limited liability company; D. The filing by or against Lessee of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation. conservatorship, or similar proceeding (and in the case of any such proceeding instituted against Lessee, such proceeding is not dismissed or stayed within ninety (90) days of the commencement thereof, provided that Lessor shall not be obligated to advance additional funds during such period); E. Lessee shall make an assignment for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of Lessee held by or deposited with Lessor; F. A final judgment for the payment of money in excess of $250,000 is rendered against Lessee, or any attachment proceedings are instituted with respect to any significant portion of Lessee's assets or property, and the same shall remain undischarged for a period of ninety (90) days during which execution shall not be effectively stayed; G. Lessee, or any affiliate of Lessee, shall default in the payment of principal and/or interest when due (whether by acceleration or otherwise) or shall default in the performance of any obligation or indebtedness owed to the Bank or to any subsidiary or affiliate of the Bank (whether directly as a lender to Lessee or as one lender in a bank syndicate agreeing to lend to Lessee or Lessee's affiliate, or as holder of a participation in a loan by another lender to Lessee or lessee's affiliate), which obligation shall remain in default for lack of performance or which indebtedness shall remain unpaid and unsatisfied following the conclusion of any applicable grace period in respect to such obligation or indebtedness;

H. If (i) the Lessee ceases to be a wholly owned subsidiary of Suprema Specialties, Inc. ("Suprema"); or (ii) either Mark Cocchiola or Paul Lauriero is no longer actively involved in the day-to-day management of Suprema and the Lessee as President and Executive Vice President, respectively, in substantially the same manner as presently exist; or (iii) Suprema and the Lessee shall fail to continue to engage principally in the businesses of the same general type now conducted by them and preserve, renew and keep in full force and effect their respective corporate existences and take all reasonable action to maintain all rights, privileges, licenses and franchises necessary or desirable as determined in the normal conduct of their respective businesses and comply in all material respects with all material contractual obligations and requirements of law; I. Any event described in subparagraphs 23(c) through 23(g) hereof shall occur with respect to any guarantor or any other party liable for payment or performance of this Lease; J. Any certificate, or written statement, representation, warranty or financial statement furnished pursuant to or in connection with this Lease by or on behalf of Lessee or any guarantor or other party liable for payment or performance of this Lease is false in any material respect at the time as of which the facts therein set forth were stated or certified, or omits any substantial contingent or unliquidated liability or claim against Lessee or any such guarantor or other party, or, upon the date of execution of this document or any Schedule, there shall have been any materially adverse change in any of the facts disclosed by any such certificate, statement, representation or warranty, which shall not have been disclosed in writing to Lessor at or prior to the time of execution of this document or such Schedule; K. An event of default shall have occurred under any other lease agreement wherein Lessor is, at the time of such default, the "lessor" and Lessee is the "lessee"; L. An event of default shall have occurred under the Syndicated Revolving Credit Facility; M. Lessee shall fail to perform any non-monetary covenant, obligation, term or condition of this Lease not described in this Paragraph 23 which failure continues for a period of thirty (30) days following the date of written notice thereof to Lessee by Lessor; provided, however, if such default is of a nature that it cannot reasonably be cured within thirty (30) days, if Lessee fails to (i) commence curing such default within thirty (30) days and (ii) diligently pursue the curing of such default. 24 REMEDIES. Upon the occurrence of any Event of Default hereunder, the rights and duties of the parties shall be as set forth in this paragraph, Lessor may elect, in its sole discretion, to do one or more of the following upon the occurrence of an Event of Default and at any time thereafter: A. Upon written notice to Lessee terminate this Lease as to any or all of the Schedules then in effect;

B. Demand that Lessee return the Equipment to Lessor whereupon Lessee shall promptly deliver the Equipment to Lessor to the place or places designated by Lessor. If Lessee does not so deliver the Equipment, Lessee shall make the Equipment available for retaking and authorizes Lessor, its employees and agents to enter Lessee's premises and any other premises (insofar as Lessee can permit) for the purpose of retaking. In the event of retaking, Lessee expressly waives all rights to possession and all claims for injuries to persons or property suffered through or loss caused by retaking. Any repossession accomplished under this paragraph 24(b) shall not release Lessee from liability for damages of Lessor sustained by reason of Lessee's default hereunder. C. Lessor may revoke Lessee's privilege of paying Rent in installments causing acceleration of all remaining Rents through the remaining term of the Lease, and, upon Lessor's demand, as liquidated damages, and not as a penalty, Lessee shall promptly pay to Lessor the aggregate of (i) all Rent accrued and unpaid prior to the date of such Event of Default, (ii) all future Rent due through the end of the basic term or through the end of the current renewal term, as the case may be, discounted to present value, the discount rate to be applied equal to the discount rate of the Federal Reserve Bank of Cleveland then in effect on the earlier of the date of entry of judgment on such claim or the date of payment of such sum by Lessee, (iii) all costs and expenses incurred by Lessor in the repossession, recovery, storage, repair, inspection, appraisal, refurbishing, sale, release or other disposition of the Equipment, (iv) reasonable attorney's fees and costs, including any fees or costs incurred by Lessor in defending any action relating to this Lease or participating in any bankruptcy or insolvency proceeding to which Lessee is a party, or otherwise incurred due to Lessee's default, (v) the estimated residual value of the Equipment as of the end of the current term of the Lease, if any, and (vi) any claim for indemnity under paragraph 15 of this Agreement or under the Supplement, if any, in favor of Lessor hereunder. In the event that any court having jurisdiction shall determine that in calculating damages hereunder as a result of a default by Lessee that sums payable in the future under the Lease, other than future Rent, must be discounted to present value, the discount rate to be applied equal to the discount rate of the Federal Reserve Bank of Cleveland then in effect on the earlier of the date of entry of judgment on such claim or the date of payment of such sum by Lessee. D. In its sole discretion, Lessor may sell or release the Equipment or any part thereof, at public auction or by private sale or lease at such time or times and upon such terms as Lessor may determine, free and clear of any rights of Lessee and, if notice thereof is required by law, any notice in writing of such sale or lease by Lessor to Lessee given not less than ten (10) days prior to the date thereof shall constitute reasonable notice thereof to Lessee. All proceeds of the sale or releasing, or both, less (i) all expenses incurred in retaking the Equipment, making necessary repairs to the Equipment and enforcing this Lease, (ii) all damages that Lessor shall have sustained by reason of Lessee's default, and (iii) reasonable attorney's fees and expenses shall be credited against Lessee's liability hereunder as and when received by Lessor. Sums in excess of Lessee's liability shall belong to Lessor. Lessee shall be liable for any deficiency.

E. The provisions of this paragraph 24 shall not prejudice Lessor's right to recover or prove damages for unpaid Rent accrued prior to default, or bar an action for a deficiency as herein provided, and the bringing of an action with an entry of judgment against Lessee shall not bar Lessor's right to repossess any or all of the Equipment F. Lessor's remedies shall be available to Lessor's successors and assigns, shall be in addition to all other remedies provided to it under the UCC (specifically, the remedies set forth in 13 Pa. C.S. ss.ss. 2A523(a), (b) and (c), or by any other applicable law, and may be exercised concurrently or consecutively. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. G. Lessor shall use commercially reasonable efforts to mitigate its damages under this Agreement. 25 LESSEE REPRESENTATIONS AND WARRANTEES. In order to induce Lessor to enter into this Lease and to lease the Equipment to Lessee, Lessee represents and wan-ants, as of the date hereof, and as of the date of execution of each Schedule hereunder, that: A. If not a natural person, Lessee is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full power and authority to conduct its business as such business is presently being conducted, to own or hold property under lease and to enter into and perform its obligations under this Lease. Lessee is duly qualified to do business and is in good standing as a foreign entity in all states where its failure to so qualify would have a material adverse effect on its ability to perform its obligations under this Lease. B. Lessee has full power and authority to enter into the transactions provided for in this Lease and has been duly authorized to do so by all necessary and appropriate action and, when executed and delivered by Lessee, this Lease will constitute the legal, valid and binding obligations of Lessee, enforceable in accordance with its terms. C. The execution, delivery, and performance by Lessee of this Lease and all related instruments and the consummation by Lessee of the transactions contemplated hereby: (i) do not require any stockholder approval or the consent of any trustee or holder of any indebtedness or obligation of Lessee or any consent, authorization, or approval of, any filing of or registration with, or other action in respect to any federal, state, governmental authority or agency (or, if so required, such approval or consent has been obtained), (ii) do not and will not result in any material violation of any term of any agreement, instrument, judgment, decree, franchise, permit, order, law, statute, rule, or governmental regulation presently applicable to it, (iv) are not in conflict with and do not constitute a default under any of the terms or provisions of, or subject the leased Equipment or any part thereof to any lien of, any indenture, mortgage, lease, contract, or other agreement or instrument (other than this Lease) to which Lessee is a party or by

which it or its property is bound or affected, and (v) do not and will not contravene Lessee's articles of incorporation and by-laws or other organizational documents. D. There are no pending actions or proceedings to which Lessee is a party, and there are no other pending or threatened actions or proceedings of which Lessee has knowledge, before any court, arbitrator, or administrative agency, which would materially adversely affect the financial condition of Lessee or the ability of Lessee to perform its obligation hereunder. Further, Lessee is not in default under any material obligations for the payment of borrowed money, for the deferred purchase price of property or for the payment of any Rent which would have the same such effect. E. Under the laws of the state(s) in which the Equipment is to be located, the Equipment consists solely of personal property. F. Lessee's financial statements (copies of which have been furnished to Lessor) have been prepared in accordance with generally accepted accounting principles consistently applied, and accurately and completely present Lessee's financial condition and the results of its operations as of the date of and for the period covered by such statements, and since the date of such statements there has been no material adverse change in such conditions or operations. G. The address stated on page one of this Lease is the chief place of business and chief executive office of Lessee; and Lessee does not conduct business under a trade, assumed, or fictitious name. H. Prior to the year 2000, Lessee reviewed the areas within its business and operations which could be adversely affected by, and developed a program to address on a timely basis, the risk that certain computer applications used by Lessee may be unable to recognize and properly perform date-sensitive functions involving dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem did not result in, and is not reasonably expected to result in, any material adverse effect on the business, properties, assets, financial condition, results of operations or prospects of Lessee, or the ability of Lessee to duly and punctually pay or perform its obligations hereunder and under the related documents. 26 FINANCE LEASE. A. Acknowledgment. The Lease is intended as a "Finance Lease" as that term is defined in Section 2A103 of the UCC. Lessee acknowledges that Lessor has not selected, manufactured or supplied the Equipment; that Lessor has acquired the Equipment at the direction of Lessee and solely for the purpose of leasing the Equipment to Lessee; and that (i) Lessee has selected the supplier or vendor of the Equipment, (ii) as provided in paragraph 8, Lessee is entitled to directly enforce against the supplier or vendor of the Equipment, any and all warranties and promises made to Lessor by the supplier or vendor, and (iii) Lessee may communicate directly with the vendor or supplier

to obtain a complete and accurate statement of all such warranties or promises, including any disclaimers or limitations thereof B. Waiver of Certain of Lessee's Remedies. In recognition that this is a Finance Lease and that Lessor has not sold, selected or delivered the Equipment to Lessee and has made no warranties or representations in respect thereto, to the extent permitted by applicable law, Lessee, for itself and for its successors and assigns, hereby waives any and all rights or remedies afforded a lessee by Sections 2A503 through 2A522 inclusive, of the UCC, including, without limitation, Lessee's right to (i) cancel, terminate or repudiate this Lease or any Schedules hereto; (ii) reject or revoke acceptance of the Equipment; (iii) recover damages from Lessor for any breach of warranty or representation in respect to the Equipment; (iv) assert any security interest in the Equipment in Lessee's possession or control; (v) deduct, recoup or offset of any claimed damages due to Lessor's default; (vi) accept partial delivery of the Equipment or to "cover" by purchasing or leasing replacement equipment; (vii) recover any general, incidental or consequential damages (including without limitation, expenses and commissions in connection with the inspection, receipt, caring for, storing, repair or disposal of any Equipment or (viii) assert a claim by way of replevin, detinue, sequestration, claim, delivery, or the like, for any Equipment. 27 GOVERNING LAW AND JURISDICTION. This Lease has been delivered and accepted and will be deemed to be made in the State where Lessor's office indicated above is located. THIS LEASE AND ALL AGREEMENTS, INSTRUMENTS AND DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED BY LESSEE AND DELIVERED TO LESSOR RELATING TO THIS LEASE OR THE TRANSACTIONS CONTEMPLATED HEREBY WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE LESSOR'S OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. Lessee hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the county or judicial district where Lessor's office indicated above is located; provided that nothing contained in this Lease will prevent Lessor from bringing any action, enforcing any award or judgment or exercising any rights against Lessee individually, against any security or against any of Lessee's property within any other county, state or other foreign or domestic jurisdiction. Lessor and Lessee agree that the venue provided above is the most convenient forum for both parties. Lessee waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Lease. 28 NOTICES. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder must be in writing and will be effective upon receipt. Such notices and other communications may be hand-delivered, sent by facsimile transmission with confirmation of delivery and a copy sent by first-class mail, or sent by nationally recognized overnight courier service, to a party's address set forth above or to such other address as any party may give to the other in writing for such purpose. Copies of all notices to Lessee shall be sent to Blank Rome Tenzer Greenblatt, LLP, 405 Lexington Avenue, New York, NY 10174, Attention: Martin Luskin, Esq.

29 MISCELLANEOUS. A. Whenever the context of this Lease requires, the neuter gender includes the masculine and feminine, and the singular number includes the plural. Whenever the word Lessor is used herein, it shall include all assignees of Lessor. If this Lease is executed by more than one party as Lessee, the obligations of such persons or entities will be joint and several. B. References to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Lease. Section headings in this Lease are included for convenience of reference only and shall not constitute a part of this Lease for any other purpose. Unless otherwise specified in this Lease, all accounting terms shall be interpreted and all accounting determinations shall be made in accordance with GAAP. C. Time is of the essence in the performance of this Lease and each and all of its provisions. D. If any provision of this Lease is held invalid or unenforceable, the remaining provisions will not be affected thereby, and to this end, the provisions of this Lease are declared severable. E. If there is any conflict between the terms of any Schedule and this document or between any Schedule and any other document, the terms of the Schedule shall control. F. This document, the Schedule(s), the Supplement(s), the Addendum(s) and the Acceptance(s) executed by Lessor and Lessee constitute the. entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease and supersede all other prior agreements and understandings whether oral or written between the parties with respect to the subject matter hereof. This Lease may not be changed, waived, amended or terminated except by a written agreement signed by both Lessor and Lessee, except that Lessor may insert on the appropriate Schedule the serial numbers of the Equipment after delivery thereof. No express or implied waiver by Lessor of any Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future and/or subsequent Event of Default whether similar in kind or otherwise but shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Lessee in any case will entitle Lessee to any other or further notice or demand in the same, similar or other circumstance. G. Lessee hereby authorizes Lessor to make appropriate announcements of the leasing arrangements entered into between Lessor and Lessee, including but not limited to announcements which are commonly known as tombstones, in such publications and to such selected parties as Lessor deems appropriate in its sole and absolute discretion. Lessee shall not issue any press releases or other public disclosures,

either written or oral, of the existence or terms of this Lease without Lessor's prior written consent; provide , that the foregoing shall not prohibit Lessee from making any disclosures to or filings with any governmental authority, or from disclosing this Lease to Lessee's accountants, attorneys and other agents or to Lessee's lenders, or from reflecting the terms of this Lease in any financial or accounting statements or reports made public in the ordinary course of Lessee's business. 30 SECURITY INTEREST. If the Lease is deemed at any time to be a lease intended as security, Lessee hereby grants to Lessor a security interest in the Equipment to secure all sums due hereunder, as well as any other obligations or sums due by Lessee to Lessor, whether now existing or hereafter contracted for or hereafter arising. 31 COUNTERPARTS. This Lease may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Lease by facsimile transmission shall be effective as delivery of a manually executed counterpart. Any party executing this Lease by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission. 32 WAIVER OF JURY TRIAL. EACH OF LESSOR AND LESSEE HEREBY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY LESSOR OR LESSEE IN CONNECTION WITH THIS LEASE OR ANY TRANSACTION RELATED HERETO. LESSEE AND LESSOR ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY. Lessee acknowledges that it has read and understood all the provisions of this Lease, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof with the intent to be legally bound. ATTEST: SUPREME SPECIALTIES NORTHWEST, INC., LESSEE By: /s/ Mark Cocchiola (SEAL) ---------------------------------- ------------------------------------- Name: Name: Mark Cocchiola ---------------------------- ----------------------------------- Title: Title: President --------------------------- ---------------------------------- Federal Tax I.D.# ---------------------- Accepted at Pittsburgh, Pennsylvania by: PNC LEASING, LLC, LESSOR By: /s/ Michael J. Woodring (SEAL) ------------------------------------ Name: Michael J. Woodring ---------------------------------- Title: President ---------------------------------

<TABLE> <CAPTION> Schedule of Leased Equipment (First Amendment Tax Lease) PNC LEASING <S> <C> Master Lease Agreement Number: 2557 Schedule Number: 1 Master Lease Agreement Date: December 28, 2000 Schedule Date: December 28,2000 Supplement (First Amendment) Date: December 28, 2000 </TABLE> 1 SCHEDULE: This Schedule is attached to and made a part of that certain Master Lease Agreement as described above between PNC LEASING, LLC as Lessor and SUPREMA SPECIALTIES NORTHWEST, INC. as Lessee, as modified by a Supplement (First Amendment Tax Lease) between Lessor and Lessee as identified above (the "Lease"). 2 EQUIPMENT DESCRIPTION AND LOCATION: See Equipment descriptions and locations on Exhibit A, attached hereto and made a part hereof. The Equipment described on the original copy of Exhibit A in Lessor's possession shall be conclusively presumed to be true and correct 3 CAPITALIZED COSTS: ================== ===================== ================== Equipment Cost Upfront Sales Tax Total ------------------ --------------------- ------------------ $5,957,400.00 -0- $5,957,400.00 ================== ===================== ================== 4 INTERIM RENT AND PROGRESS PAYMENT FACTORS: During any interim rent term (as defined in the Supplement), Interim Rent shall be calculated based on a Daily Lease Rate Factor of 0 percentage points (0%). During any progress payment term (as defined in the Supplement), Progress Payments shall be calculated based on the Prime Rate [plus/minus] a Progress Payment Factor of 0 percentage points (0%). 5 BASE LEASE TERM: The base term of the Lease for the Equipment described in this Schedule is eighty-four (84) months commencing on December 28, 2000 and terminating on December 28, 2007, unless sooner terminated under the Lease. A Termination Value Table is attached hereto as Exhibit "B" and made a part hereof. 6 RENT: Total rent of $6,689,620.22, exclusive of applicable sales taxes, is due and payable as follows: <TABLE> <CAPTION> =============================== =================== ============ =================== Number and Type Date Payments Amount of Date Payments Of Payments Commence Payments Terminate ------------------------------- ------------------- ------------ ------------------- <S> <C> <C> <C> 84 monthly payments, in advance December 28, 2000 $79,638.34 November 28, 2007 =============================== =================== ============ =================== </TABLE> 7 SALES TAX: Upfront sales tax on the lease transaction in the amount of $-0- is due from Lessee on the commencement date of the base term of the Lease. 8 EARLY TERMINATION OPTION: In accordance with paragraph 8 of the Supplement referenced above, Lessee may terminate the Lease on the last day of the twelfth

(12th) month of the base term by returning all (but not less than all) of the Equipment to Lessor, and paying to Lessor a termination fee equal to 80.10 % of the Equipment Cost. 9 EARLY BUYOUT OPTION: In accordance with paragraph 11 of the Supplement referenced above, Lessee may purchase all (but not less than all) of the Equipment on the last day of the seventy-second (72nd) month of the base term for a purchase price equal to thirty-five percent (35%) of the Equipment Cost. 10 PURCHASE OPTION: In accordance with subparagraph 12(a) of the Supplement referenced above, Lessee may purchase all, but not less than all, of the Equipment described herein, by paying to Lessor on the last day of the base term of the Lease, an amount equal to the greater of (i) the fair market value of the Equipment determined as provided in subparagraph 12(b) of the Supplement referenced above, or (ii) twenty percent (20%) of the Equipment cost. 11 RENEWAL: In accordance with subparagraph 12(c) of the Supplement referenced above, Lessee may extend the Lease for a Renewal Term of sixteen (16) months with a monthly rent equal to 1.33680 percent of the Equipment cost, plus applicable taxes, with the first such rent being due and payable by Lessee on December 28, 2007. 12 DEPRECIATION RECOVERY PERIOD: For purposes of Sections 168(e)(3) and 168(c) of the Code (as defined hereafter), the Equipment constitutes seven (7) year recovery property. Lessee Acceptance Certificate This Lessee Acceptance Certificate ("Acceptance") is hereby made a part of the Lease referenced above, the terms and conditions of which are incorporated herein by reference. All of the Equipment on Exhibit A was received by us and is in good order and condition, installed to our satisfaction and acceptable to us. We reaffirm all of the terms of Paragraph 8 of the Master Lease. We approve the payment of the invoice(s) covering the Equipment for the amount(s) shown thereon. We represent and warrant (a) that the representations and warranties as set forth in paragraph 25 of the Lease are true and correct as of the date hereof; (b) that we have satisfied or complied with all requirements set forth in the Lease to be satisfied or complied with on or prior to the date hereof; and (c) that no Event of Default under the Lease has occurred and is continuing on the date hereof. All of the Equipment has been fully delivered and installed at the location where it will be used as of the following date: December 28, 2000 WITNESS the due execution hereof with the intent to be legally bound. PNC LEASING, LLC, Lessor SUPREME SPECIALTIES NORTHWEST, INC., Lessee By: /s/ Michael J. Woodring By: /s/ Mark Cocchiola -------------------------- ---------------------------------------- Title: Vice President Title: President ------------------------ --------------------------------------

upplement to Master Lease Agreement PNC LEASING (First Amendment Tax Lease) Lessee: SUPREMA SPECIALTIES NORTHWEST, INC. Supplement Date: December 28,2000 Master Lease Agreement No.: 2557 Master Lease Agreement Date: December 28, 2000 1 SUPPLEMENT. This Supplement to Master Lease Agreement ("Supplement") is hereby made a part of the Lease referenced above between the undersigned Lessor and Lessee. All terms and conditions of said Lease are incorporated herein by reference. 2 EQUIPMENT. The Equipment which is subject to the Lease is or will be described on one or more Schedule(s) of Leased Equipment which make reference to the Lease and this Supplement, and includes all products (including without limitation insurance proceeds) of the Equipment, and all additions and accessions thereto, substitutions therefor and replacements thereof. 3 TITLE OF EQUIPMENT. At Lessee's request, Lessor has purchased the Equipment as a buyer in the ordinary course of business for value. Title to the Equipment leased hereunder shall remain with the Lessor at all times. Lessee shall have no right, title or interest in or to the Equipment except as expressly set forth in the Lease. 4 EQUIPMENT LOCATION. The Equipment shall be located at the address stated in the applicable Schedule and shall not be removed without Lessor's prior written consent. 5 INTERIM RENT TERM. The interim rent term of the Lease as respects any Equipment described in the applicable Schedule shall commence on the earlier of (a) the date of Lessor's first advance of funds for the purchase of such Equipment and (b) the date of Lessee's acceptance of such Equipment, and shall terminate on the day before the commencement of the base lease term for such Schedule. 6 INTERIM RENT. During the interim rent term, Lessee shall pay Lessor as additional Rent Interim Rent for each Item of Equipment, an amount equal to the product of Lessor's capitalized cost for such Item times the number of days in the interim rent term times the Daily Lease Rate Factor provided for in the applicable Schedule. Interim Rent shall be due and payable monthly in arrears during the interim rent term. 7 LEASE TERM. The base term of the Lease as respects the Equipment is set forth in the applicable Schedule. 8 EARLY TERMINATION OPTION. After ninety (90) days prior written notice to Lessor, provided that no Event of Default exists under the Lease, and further provided Lessor has received Lessee's twelfth (12th) monthly rental payment, Lessee shall have the option to terminate the Lease and return all (but not less than all) of the Equipment to Lessor. Lessee shall

exercise such option by paying to Lessor, on the last day of the twelfth (12th) month of the base term, a termination fee in immediately available funds equal to 80.10% of the Equipment Cost as set forth in the applicable Schedule. Upon return of all the Equipment in accordance with paragraph 13 below, and payment of the termination fee to Lessor, the Lease shall be terminated; subject, however, to the post-termination survival of such indemnitees, liabilities and obligations as may be required under the Lease. This early termination option shall be available to Lessee only in the time period set forth in this paragraph 8. available to Lessee only in the time period set forth in this paragraph 8. 9 RENT. The Lessee agrees to pay basic rent for the Equipment in the amount and on the dates set forth in the applicable Schedule plus applicable taxes, if any.the dates set forth in the applicable Schedule plus applicable taxes, if any. 10 TAX INDEMNIFICATION. 10 TAX INDEMNIFICATION. A. Tax Assumptions. This Lease has been entered into on the basis that Lessor is entitled to such federal, state and local income tax deductions, credits and other benefits (the "Tax Benefits') as are provided to an owner of property including, without limitation: (A) the Recovery Deductions (as defined herein); and (B) the interest deduction under the Internal Revenue Code of 1986, as amended (the "Code') in the fall amount of any interest paid or accrued by Lessor, using Lessor's method of tax accounting, for any indebtedness incurred by Lessor in financing its purchase of the Equipment (the "Interest Deductions"). B. Tax Representations. Lessee represents and warrants to Lessor (the "Tax Representations") that: (A) for purposes of Section 168(e)(3) and 168(c) of the Code, each Item of Equipment constitutes an --------------------- asset described in the "property class" and "applicable recovery period" as designated in paragraph 10 of the applicable Schedule; (B) the Lessor shall be entitled to claim federal, state and local depreciation deductions (the "Recovery Deductions" which are based upon, and will fully recover, the total cost of each Interim of Equipment, including, for federal income tax purposes, modified accelerated cost recovery system deductions computed pursuant Supplement to Code Section 168(b)(1)(A) and (B) and 168(e)(3) based upon 100% of Lessor's original cost of each Item of Equipment; (C) each Item of Equipment is not "limited use property" within the meaning of Revenue Procedure 76-30 (1976-2 Cum. Bull. 647), and no improvements, changes, additions, or alterations made by or at the request of Lessee will cause such Item of Equipment to be "limited use property"; (D) this Lease, including any and all Schedules, constitutes a true lease" for federal, state and local income tax purposes and Lessor will be the "true owner" of each Item of Equipment entitled to claim the Recovery Deductions and other Tax Benefits anticipated by Lessor hereunder; (E) each Item of Equipment is reasonably estimated to have an economic useful life of at least 125% of the initial term of the Lease and have an economic value of at least 20% of Lessor's original cost of the Item of Equipment at the expiration of the lease term; (F) each Item of Equipment does not and will not require any improvements. modifications, alterations or additions in order to render it complete for its intended use by Lessee; (G) Lessor will not realize any taxable income as a result of any improvements, modifications, alterations or additions to the Equipment or any Item of Equipment made by anyone other than Lessor, (H) all amounts includable in the gross income of Lessor

with respect to each Item of Equipment and all deductions allowable to Lessor with respect to each Item of Equipment will be treated as derived from, or allocable to sources within the United States; and (I) Lessee will maintain sufficient records to verify such use which records will be furnished to Lessor within 30 days after receipt of a demand therefor. C. Tax Indemnity. If for any reason whatsoever, including, without limitation, the falsehood or inaccuracy of any Tax Representation (excluding only a failure of Lessor to claim properly or timely the Recovery Deductions or Interest Deductions for the appropriate year, or the failure of Lessor to have sufficient taxable income to benefit from the Recovery Deductions or Interest Deductions): (A) Lessor shall lose, shall not have or shall lose the right to claim or there shall be disallowed, eliminated, reduced, or recaptured with respect to Lessor, for federal, state or local income tax purposes, all or any portion of the Tax Benefits with respect to an Item of Equipment; or (B) the Lessor's anticipated net after-tax economic and accounting yields and periodic net after-tax cash flows over the term of the applicable Schedule (based upon the same assumptions used by Lessor in originally evaluating the Lease and applicable Schedule at the commencement of the term of the applicable Schedule) (the Lessor's "Anticipated Economics") is adversely affected due to (i) any income or deductions with respect to any Item of Equipment being treated as derived from, or allocable to, sources without the United States, or (ii) enactments of new income tax legislation or amendments and other changes to the Code or any other state or local income tax law, including the promulgation of regulations and judicial or administrative rulings with respect thereto; or (C) the Lessor shall be required to include any amount in its taxable income as a result of any improvements. modifications, alterations or additions to any Item of Equipment made by anyone other than Lessor (an occurrence of an event under (A), (B) and/or (C) being referred to individually or collectively as a "Loss"); then, at the option of the Lessor, (x) the rent over the remainder of the term of the applicable Schedule shall, on and after the next succeeding rent payment date, after written notice to Lessee by Lessor that a Loss has occurred, be increased by such amount which, in the sole opinion of Lessor, after deduction of all taxes owed by Lessor to any governmental or taxing authority as a result of such increase in rent, will cause Lessor's actual net after-tax economic and accounting yields and periodic net after-tax cash flows over the term of the applicable Schedule (the Lessor's "Actual Economics") to equal the Lessor's Anticipated Economics that would have been available if such Loss had not occurred. and Lessee shall forthwith pay to Lessor, on demand, an amount which, after deduction of all taxes owed by Lessor to any governmental or taxing authority as a result of the receipt of such amount, shall be equal to the amount of any penalties, interest or additions to tax which may be assessed by any governmental or taxing authority against Lessor attributable to the Loss, or (y) after written notice to Lessee by Lessor that a Loss has occurred, Lessee shall pay to Lessor, upon demand, in a lump sum, an amount which, after deduction of all taxes owed to any governmental or taxing authority by Lessor as a result of the receipt of such lump sum payment, will cause Lessor's Actual Economics to be equal to the Lessor's Anticipated Economics that would have been available if such Loss had not occurred plus an amount which, after deduction of all taxes owed by Lessor to any governmental or taxing authority as a result of the receipt of such amount, shall be

equal to the amount of any penalties, interest, or additions to which may be assessed by any governmental or taxing authority against Lessor attributable to the Loss. D. Calculation. All calculations of Lessor's Actual Economics with respect to a Loss shall be determined on the basis of that assumption that Lessor will be subject to federal, state and local corporate income tax rates at the maximum statutory rate. Any written notice that any Loss has occurred pursuant to this paragraph 10 shall be accompanied by a written statement from Lessor describing in reasonable detail such Loss and the computations of the amounts payable, either in a lump sum or revised rent payments as set forth above, which computation shall be binding and conclusive upon Lessee, absent manifest error. E. Interest. Upon failure to pay any indemnification amount when due, by demand or otherwise, such unpaid obligation shall bear interest at a per annum, rate equal to the prime rate of interest as announced, from time to time, by the Bank. F. Consolidated Return. As used in this paragraph 10, the term "Lessor" shall include any successor or assign of Lessor and an, member of an affiliated group of which Lessor is, or may become, a member if consolidated, joint or combined returns are filed for such affiliated group for federal, state or local income tax purposes. G. Survival. The indemnities and assumptions of liabilities and obligations provided for in this paragraph 10 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease. 11 EARLY BUYOUT OPTION. After ninety (90) days prior written notice to Lessor, provided that no Event of Default exists under the Lease, and further provided that Lessor has received Lessee's seventy-second (72nd) monthly rental payment, Lessee may, on the last day of the seventy-second (72nd) month of the base term, purchase all (but not less than all) of the Equipment for a purchase price equal to 35% of the Equipment Cost as set forth in the applicable Schedule, payable in immediately available funds. Thereupon, the Lessor shall convey the Equipment to the Lessee on an as-is, where-is basis, without representation or warranty whatsoever, except that the Equipment shall be conveyed free and clear of any liens or encumbrances created due to or through the acts or omissions of Lessor. This early buyout option shall be available to Lessee only in the time period set forth in this paragraph 11. 12 END OF TERM OPTIONS. A. Provided that no Event of Default will have occurred and be continuing, on the expiration of the base lease term under any applicable Schedule, at its option, Lessee may purchase all of the Lessor's right, title and interest in and to all, but not less than all of the Equipment described in such Schedule. On the last day of the base lease term under any applicable Schedule, the Lessee shall pay to the Lessor an amount equal to the greater of (i) the fair market value of the Equipment described in the applicable Schedule determined in accordance with the provisions of subparagraph (b), or (ii) the percent of the Equipment Cost stated in such Schedule. In order to exercise its option,

Lessee shall notify Lessor in writing of its intention to exercise such option at least 180 days prior to the expiration of the base lease term under any applicable Schedule. Lessee will deliver to the Lessor, on or before the expiration of the base lease term, an appraisal of the Equipment as described in subparagraph (b), together with the payment of the purchase price in immediately available funds. Thereupon, the Lessor shall convey the Equipment to the Lessee on an as-is, where-is basis without representation or warranty whatsoever, except that the Equipment shall be conveyed free and clear of any liens or encumbrances created due to or through the acts or omissions of the Lessor. B. As used in subparagraph (a), "fair market value" of the Equipment described in the applicable Schedule shall be the value of the Equipment as of the last day of the base term of the Lease, as determined by an appraiser selected by the Lessor and retained at Lessee's expense. For purposes of determining the fair market value, the appraiser shall be instructed to assume that the Equipment is in the condition required by the terms of the Lease. The report of the appraiser shall be in writing and delivered to the Lessor on or before the expiration of the base lease term. C. In the event that the Lessee does not purchase the Equipment in accordance with subparagraph (a), then (i) Lessee shall continue to pay rent for the remainder of the base lease term in the amount set forth in the applicable Schedule, and (ii) this Schedule shall automatically be extended for an additional term (the "Renewal Term") as stated in the applicable Schedule, without further action on the part of the Lessor or the Lessee. At the expiration of the Renewal Term and conditioned that no Event of Default shall have occurred and be continuing, the Lessee may either (i) purchase the Equipment at the fair market value as of the last day of the Renewal Term as determined in accordance with this paragraph 12, or (ii) return the Equipment to the Lessor in accordance with paragraph 13. Lessee shall notify Lessor of its election to either purchase or return the Equipment not less than sixty (60) days prior to the expiration of the Renewal Term. If Lessee fails to so notify Lessor of its election, this Lease will be deemed extended on a month-to-month basis on the same terms and conditions until Lessee provides Lessor with written notice of its election to terminate the Lease not less than sixty (60) days from the date of such notice. 13 RETURN OF EQUIPMENT. Upon the expiration or earlier termination of this Lease, Lessee shall return the Equipment described in the applicable Schedule, freight and insurance prepaid, to Lessor (or Lessor's nominee) at a location designated by Lessor. If requested by Lessor, Lessee will provide 180 days free storage at the Equipment's location at the expiration of the term. During the storage period, Lessee shall maintain the Equipment in operating condition for the purpose of on-site inspections by prospective buyers and shall keep the Equipment insured in accordance with paragraph 18 of the Lease. The Equipment and all parts thereto shall be free and clear of all liens (other than Lessor liens), and shall be free of all advertising or insignia and residual materials, cleaned, painted, complete with no missing components or attachments, and fully operational and able to perform its described task effectively, without repair or overhaul, within the original tolerances and specifications set by the manufacturer. Any and all costs of dismantling, packing, and removing of the Equipment shall also be paid by Lessee. If the Equipment is returned in a condition other than that described,

Lessor may commission an independent appraiser, licensed professional engineer, or manufacturer technical representative, obtained by Lessor at Lessee's cost and expense, to determine the extent of costs to return the Equipment to the condition required herein. Lessee shall promptly advance payment for all necessary repairs. Lessee's obligations to pay for repairs shall be reduced by any proceeds of insurance which Lessor has received due to the damage to the Equipment. If Lessee fails to provide timely notice of return or fails to return the Equipment to the designated location at the end of the base lease term or any renewal thereof under the applicable Schedule, and does not exercise the renewal or purchase options provided for herein (if any), then, at Lessor's option, the Lease as it relates to the applicable Schedule will be deemed extended on a month-to-month basis for a minimum renewal term of three (3) months, with rent due on the day of each month applicable and at the rate applicable to the base lease or renewal term just ended. 14 FAIR MARKET VALUE AND ESTIMATED USEFUL LIFE. In all circumstances, except where Lessee has elected to purchase the Equipment pursuant to paragraph 12(a), fair market value, fair market rental value and estimated useful life of the Equipment shall be determined by an appraiser selected by the Lessor and approved by Lessee in its reasonably judgment. The appraiser shall determine the fair market value of the Equipment on its in place value without reduction or consideration of the cost of dismantling, preparation for shipping or transportation of the Equipment. For purposes of determining the fair market value, the appraiser shall be instructed to assume that the Equipment is in the condition required by the terms of the Lease. The appraiser's decision shall be binding on the parties. If Lessee has given Lessor notice of Lessee's intention to exercise its purchase or renewal option, and the Lessor has obtained an appraisal of the Equipment as provided for herein, Lessee shall be bound by the appraisal and shall purchase the Equipment, or renew the Lease, as the case may be, at the value determined by the appraisal. The cost of the appraisal shall be borne by the Lessee. 15 MARKETING OF EQUIPMENT. At Lessor's request, Lessee shall mark the Equipment in a reasonably distinct and conspicuous manner with the name of the Lessor followed by the words "Owner and Lessor" or other appropriate words designated by Lessor. Lessee shall not alter, deface or remove any of Lessor's ownership identification plates or markings on the Equipment and, upon Lessor's request, Lessee shall affix or re-affix such identification. 16 INSURANCE. In addition to the requirements contained in paragraph 18 of the Lease, the following insurance requirements shall apply: Liability Coverage: A. General liability including/comprehensive form: premises/operations; products/completed operations, contractual liability; independent contractors; broad form property damage; personal injury; and collapse hazard. B. Bodily Injury and Property Damage Combined Single Limit Per Occurrence: $3,000,000. C. Fire-legal liability-custody, care or control, each occurrence: $ 1,000,000.

Property Coverage: (a) All risk of physical loss; Equipment must be insured for at least the total original cost 17 COVENANTS. By executing and delivering to Lessor the Lessee Acceptance Certificate included within each applicable Schedule Lessee warrants, covenants and agrees that (a) Lessee has received all of the Equipment described in such Schedule at the location, described in such Schedule; (b) Lessee has duly inspected and accepts such Equipment without reservation; (c) Lessee L, unconditionally bound to pay to Lessor the total rent and other payments due under the Lease, whether or not the related Equipment may now or hereafter become unsatisfactory in any respect; and (d) notwithstanding anything contained herein, Lessor and Lessee shall continue to have all rights which either of them might otherwise have with respect to the related Equipment against any manufacturer or seller of such Equipment or any part thereof. 18 ADDITIONAL PROVISIONS. (a) Each applicable Schedule is incorporated herein by reference; and (b) Lessee grants Lessor the right to insert the Equipment description and payment dates and terms in each applicable Schedule at the time of commencement of the base lease term. WITNESS the due execution hereof with the intent to be legally bound. Lessor: PNC LEASING, LLC Lessee: SUPREME SPECIALTIES NORTHWEST, INC. By: /s/ Michael J. Woodring By: /s/Mark Cocchiola -------------------------- --------------------------------------- Title: Vice President Title: President ----------------------- ------------------------------------