Mortgage And Security Agreement

MORTGAGE AND SECURITY AGREEMENT


by


SUPREMA SPECIALTIES, INC.


as Mortgagor


to


FLEET BANK, N.A.,


as agent


Dated: December 16, 1998


================================================================================


Record and Return to: Windels, Marx, Davies & Ives
120 Albany Street Plaza
New Brunswick, NJ 08901
Attn: Howard P. Lakind, Esq.


MORTGAGE


THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage"), is made this 16th day of December, 1998,


BY


SUPREMA SPECIALTIES, INC., a corporation duly organized, validly existing and in good standing under the laws of the State of New York, having its principal office at 510 East 35th Street, Paterson, New Jersey 07543-0280 (the "Mortgagor"),


TO


FLEET BANK, N.A., a national banking association duly organized and validly existing under the laws of the United States of America, having its principal office located at 208 Harrison Road, Glen Rock, New Jersey 07452, as agent under that certain Loan Agreement hereinafter referred to (the "Mortgagee").


W I T N E S S E T H:


WHEREAS, pursuant to a certain Second Amended and Restated Revolving Loan, Guaranty and Security Agreement dated as of the date hereof among the Mortgagor, Suprema Specialties West, Inc., Suprema Specialties Northeast, Inc. (Suprema Specialties West, Inc. and Suprema Specialties Northeast, Inc. are collectively referred to herein as the "Guarantors"), the Mortgagee and the banks signatory thereto (the "Banks") (the Second Amended and Restated Revolving Loan, Guaranty and Security Agreement as same may hereafter, be modified, amended or restated, is hereinafter referred to as the "Loan Agreement"), the Banks have severally agreed to make loans to the Mortgagor in the aggregate principal amount of up to $35,000,000 (the "Loans"), as evidenced by certain Secured Revolving Notes dated the date hereof made by the Mortgagor in favor of the Banks (the "Notes"); and


WHEREAS, this Mortgage is given and made by the Mortgagor to the Mortgagee as security for (i) the Loans evidenced by the Notes, (ii) the performance of the terms, conditions and covenants of the Mortgagor set forth in the Notes, the Loan Agreement, this Mortgage and the other loan documents executed in connection therewith (hereinafter collectively referred to as the "Loan Documents"), and (iii) the payment of all other indebtedness, monetary obligations, liabilities and duties of any kind of the Mortgagor, direct or indirect, absolute or contingent, joint or several, due or not due, liquidated or not liquidated, arising under the Notes, the Loan Agreement, this Mortgage, and the other Loan Documents.


NOW, THEREFORE, in order to induce the Mortgagee to make the Loans to the Mortgagor and to secure the payment of the


indebtedness of the Mortgagor to the Mortgagee evidenced by the Notes made by the Mortgagor to the order of the Banks and to secure the performance by the Mortgagor of all of its other obligations and covenants pursuant to the Notes, the Loan Agreement and the other Loan Documents, and to assure payment of all other indebtedness, monetary obligations, liabilities and duties of any kind of the Mortgagor, direct or indirect, absolute or contingent, joint or several, due or not due, liquidated or not liquidated, arising under the Notes, the Loan Agreement, this Mortgage, and the other Loan Documents, the Mortgagor has mortgaged, given, granted, released, assigned, transferred and set over unto the Mortgagee, and by these presents does hereby mortgage, give, grant, release, assign, transfer and set over unto the Mortgagee, its successors and assigns forever, the following described property and rights:


ALL those certain lots, pieces or parcels of land and premises situate, lying and being in the City of Paterson, County of Passaic, and State of New Jersey, as more particularly described on SCHEDULE "A" attached hereto and made a part hereof (the "Premises"); and


TOGETHER with all buildings, structures, and improvements of every nature whatsoever now or hereafter situated on the Premises (the "Improvements"); and


TOGETHER with all and singular the tenements, hereditaments, rights-of-way, privileges, liberties, easements, riparian rights, woods, waters, watercourses, mineral, oil and lights and appurtenances thereunto belonging, or in any wise appertaining, and the reversion and reversions and remainders, rents, income, issues and profits thereof; and


TOGETHER with all right, title and interest of the Mortgagor, now owned or hereafter acquired, in and to any streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, adjoining or abutting the Premises to the center line thereof, and all strips and gores within or adjoining the Premises, easements and rights-of-way, public or private, all sidewalks and alleys, now or hereafter used in connection with the Premises or abutting the Premises; and


TOGETHER with all furniture, fixtures, equipment and other articles of personal property owned by the Mortgagor and now or hereafter attached to or used in connection with, or with the operation of, any improvements located on the Premises, as to which this Mortgage constitutes a security agreement under the New Jersey Uniform Commercial Code (in addition to and not in lieu of any other security agreement between the parties), including, without limitation, all building supplies and materials, furniture, fixtures and equipment; all furnaces, motors, dynamos, incinerators, machinery, generators, partitions, elevators, steam


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and hot water boilers, heating, air conditioning equipment, wall cabinets, lighting and power plants, coal and oil burning apparatus, pipes, plumbing, radiators, sinks, bath tubs, water closets, refrigerators, gas and electrical fixtures, stoves, ranges, shades, screens, blinds, washing machines, clothes dryers, dishwashers, freezers, awnings, vacuum cleaning systems, sprinkler systems or other fire prevention or extinguishing apparatus and materials, including all accessories, additions, substitutions and replacements thereof, and all cash and non-cash proceeds thereof, all of which shall be deemed to be and remain and form a part of the Premises and are covered by the lien of this Mortgage. If the lien of this Mortgage shall be subject to a conditional bill of sale, chattel mortgage, or other security interest covering any such property, then all the right, title and interest of the Mortgagor in and to such property, together with the benefits of any deposits or payments now or hereafter made thereon, are and shall be covered by the lien of this Mortgage; and


TOGETHER with any and all awards, damages, payments and other compensation, and any and all claims therefor and rights thereto, which may result from taking or injury by virtue of the exercise of the power of eminent domain, or any damage, improvements, injury or destruction in any manner caused to the Premises or thereon, or any part thereof; and


TOGETHER with all the estate, right, title, interest, property, possession, claim and demand whatsoever of the Mortgagor, as well in law as in equity, of, in and to the same and every part and parcel thereof with the appurtenances (hereinafter the Premises and all the Improvements, rights, interests and benefits that go with it as described above shall be collectively referred to as the "Mortgaged Premises").


TO HAVE AND TO HOLD the above-granted Mortgaged Premises unto the Mortgagee, its successors and assigns, to its and their own proper use, benefit and behoof forever.


PROVIDED THAT if the Mortgagor shall well and truly pay, or there shall otherwise be paid to the Mortgagee, the indebtedness evidenced by the Notes secured hereby at the time and in the manner provided in the Notes and/or this Mortgage, and the Mortgagor shall well and truly abide by and comply with each and every covenant and condition set forth in this Mortgage, the Notes and the other Loan Documents, then these presents and the lien and interest hereby transferred and assigned shall cease, terminate and be void. The Mortgagee shall release the Mortgaged Premises and renounce any other rights granted to it herein, and shall execute at the request of the Mortgagor a release of this Mortgage and any other instrument to that effect deemed necessary or desirable, upon payment and performance being made on the indebtedness and covenants secured hereby.


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This is a Second Mortgage subject and subordinate to that certain Mortgage dated March 29, 1996 which was recorded in the Office of the Register of Passaic County on April 17, 1996, in Volume 159, Page 053, et seq., as amended and modified.


ARTICLE I. THE MORTGAGOR REPRESENTS, WARRANTS, COVENANTS AND AGREES WITH THE MORTGAGEE AS FOLLOWS:


Section 1. Definitions. In this Mortgage, all words and terms not defined herein shall have the respective meanings and be construed herein as provided in the Notes. Any reference to a provision of the Notes shall be deemed to incorporate that provision as a part hereof in the same manner and with the same effect as if the same were fully set forth herein.


Section 2. Interpretation and Construction. The provisions of the Notes and the Loan Agreement shall be applied to this Mortgage in the same manner as applied therein.


Section 3. Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon, or to give to, any person other than the Mortgagor and the Mortgagee any right, remedy or claim under or by reason hereof. All covenants, stipulations and agreements herein contained by and on behalf of the Mortgagor shall be for the sole and exclusive benefit of the Mortgagee.


Section 4. Indebtedness. The Mortgagor shall pay the indebtedness evidenced by the Notes and the Loan Agreement and secured by this Mortgage at the time and in the manner provided for the payment of the same in the Notes and the Loan Agreement.


Section 5. No Credit for Taxes Paid. The Mortgagor shall not be entitled to any credit against payments due hereunder by reason of the payment of any taxes, assessments, water or sewer rent or other governmental charges levied inst the Mortgaged Premises.


Section 6. Seisin and Warranty. The Mortgagor is seized of an indefeasible estate in fee simple in the Mortgaged Premises, and Mortgagor warrants the title to the Mortgaged Premises, subject to those title exceptions set forth in title commitment no. 96-LT-0016 issued by Stewart Title Guaranty Company, as continued through the date hereof. The Mortgagor hereby covenants that the Mortgagor shall (i) preserve such title and the validity and priority of the lien of this Mortgage and shall forever warrant and defend the same to the Mortgagee against all lawful claims whatsoever and the claims of all persons or entities (hereinafter collectively referred to as "Persons") whomsoever claiming or threatening to claim the same or any part thereof, and (ii) make, execute, acknowledge and deliver all such further or


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other deeds, documents, instruments or assurances, and cause to be done all such further acts and things as may at any time hereafter be reasonably required by the Mortgagee to fully protect the lien of this Mortgage.


Section 7. Insurance. (i) The Mortgagor shall obtain, or cause to be obtained, and shall maintain or cause to be maintained, at all times throughout the term of this Mortgage, insurance on the Mortgaged Premises in such manner and against such loss, damage and liability, including liability to third parties, as is customary with Persons operating properties similar to the Mortgaged Premises and in the same or similar business and located in the same or similar areas. Such insurance shall include, without limitation, the following:


(a) Commercial general liability insurance (including garage liability, innkeeper's liability, products liability and elevator liability, if applicable) insuring against any and all liability of the Mortgagor or claims of liability of Mortgagor arising out of, occasioned by or resulting from any accident or otherwise resulting in or about the Mortgaged Premises and the adjoining streets, sidewalks and passageways, including XCU, blanket contractual liability and completed operations coverage, in such amounts as are usually carried by Persons operating properties similar to the Mortgaged Premises, but in any event with a combined single limit of not less than $1,000,000.00 for personal injury and property damage with respect to any one occurrence, which amount shall be increased from time to time to reflect what a reasonably prudent Person operating property similar to the Mortgaged Premises would carry, together with excess/umbrella liability insurance on a "follow form" basis with minimum limits of $10,000,000.00;


(b) Loss or damage by perils customarily included under standard "all risk" policies, including business interruption and rental insurance if applicable, covering all perils and contingencies as may be required by the Mortgagee, including a so-called "agreed amount" replacement cost endorsement insuring one hundred percent (100%) of the replacement cost of the Improvements;


(c) For any period during which construction is being performed on the Mortgaged Premises, "Builder's All-Risk" coverage policy of fire and hazard insurance (completed value form) with respect to the Mortgaged Premises, including vandalism and malicious mischief, which insurance policy shall contain a replacement cost endorsement;


(d) If the Mortgaged Premises are required to be insured pursuant to the Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of 1968, and the regulations


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promulgated thereunder, because it is located in an area which has been identified by the Secretary of Housing and Urban Development as a Flood Hazard Area, then a flood insurance policy covering the Mortgaged Premises in an amount not less than the outstanding principal balance of the Notes, or the maximum limit of coverage available, whichever amount is less;


(e) Boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning and elevator equipment, provided that the Mortgaged Premises contains equipment of such nature.


(ii) Each insurance policy required under this Section 7 shall be written by insurance companies authorized or licensed to do business in the State of New Jersey having an Alfred M. Best Company, Inc. rating of A or higher and a financial size category of not less than XII, and shall be on such forms and written by such companies as shall be reasonably approved by the Mortgagee. Such insurance coverage may be effected under overall blanket or excess coverage policies of the Mortgagor, except as to public liability insurance which may be effected under combined single limit.


(iii) Each insurance policy required under this Section 7 providing insurance against loss or damage to property shall be written or endorsed so as to (a) contain a standard mortgagee or secured party endorsement, as the case may be, or its equivalent, (b) make all losses payable directly to the Mortgagee, without contribution, and (c) provide for deductibles reasonably satisfactory to the Mortgagee.


(iv) Each insurance policy required under this Section 7 and providing public liability coverage shall be written and endorsed so as to name the Mortgagee as an additional insured, as its interest may appear.


(v) Each insurance policy required under this Section 7 shall contain a provision to the effect that such policy shall not lapse or be terminated, cancelled, altered or in any way limited in coverage or reduced in amount unless the Mortgagee is notified in writing at least thirty (30) days prior to such lapse, termination, cancellation, alteration, limitation or reduction. At least thirty (30) days prior to the expiration of any such policy, the Mortgagor shall furnish evidence satisfactory to the Mortgagee that such policy has been renewed or replaced or is no longer required by this Section 7.


(vi) Each insurance policy required under this Section 7 (except flood insurance written under the federal flood insurance program) shall contain an endorsement or agreement by the insurer that any loss shall be payable to the Mortgagee, as its interest


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may appear, in accordance with the terms of such policy notwithstanding any act or negligence of the Mortgagor which might otherwise result in forfeiture of said insurance and the further agreement of the insurer waiving all rights of set-off, counterclaim, deduction or subrogation against the Mortgagor (so as not to interfere with the Mortgagee's rights).


(vii) In the event of loss or damage to the collateral, the proceeds of any insurance provided hereunder shall be applied as set forth in Section 14 of this Article I; in the event of a public liability claim, the proceeds of any insurance provided hereunder shall be applied toward extinguishing or satisfying the liability and expenses incurred in connection therewith.


(viii) The Mortgagor shall not take out any separate or additional insurance with respect to the Mortgaged Premises which is contributing in the event of loss unless it is properly compatible with all of the requirements of this Section 7.


Section 8. Preservation, Maintenance and Repair. All Improvements which are presently erected and in the future are to be erected upon the Mortgaged Premises, shall, at the Mortgagor's own cost and expense, be kept in good and substantial repair, working order and condition, and the Mortgagor shall from time to time make, or cause to be made, all necessary and proper repairs, replacements, improvements and betterments thereto. The Mortgagor shall not remove, demolish, materially alter or discontinue the use of any material part of the Mortgaged Premises without the prior express written consent of the Mortgagee, except that the Mortgagor shall from time to time make such substitutions, additions, modifications and improvements as may be necessary and as shall not impair the structural integrity, operating efficiency and economic value of the Mortgaged Premises. All alterations, replacements, renewals or additions made pursuant to this Section 8 shall automatically become and constitute a part of the Mortgaged Premises and shall be covered by the lien of this Mortgage. The Mortgagor shall not do, and shall not permit to be done, any act which may in any way impair or weaken the security under this Mortgage.


Section 9. Declaration of No Offset. The Mortgagor represents to the Mortgagee that the Mortgagor has no knowledge of any offsets, counterclaims or defenses to the principal indebtedness secured hereby, or to any part thereof, or the interest thereon, either at law or in equity. The Mortgagor shall, within fifteen (15) business days upon request by mail, furnish a duly acknowledged written statement in form reasonably satisfactory to the Mortgagee stating either that the Mortgagor knows of no offsets or defenses existing against such indebtedness, or if such offsets or defenses are alleged to exist,


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the nature and extent thereof, and in either case, such statement shall set forth the amount due hereunder.


Section 10. No Removal of Fixtures. The Mortgagor shall not remove or suffer to be removed from the Mortgaged Premises any fixtures owned by the Mortgagor as the term "fixtures" (other than trade fixtures) is defined by the law in New Jersey presently, or in the future to be incorporated into, installed in, annexed or affixed to the Mortgaged Premises (unless such fixtures have been replaced with similar fixtures of equal or greater utility and value or which have become obsolete).


Section 11. Security Agreement. This Mortgage constitutes a security agreement under the New Jersey Uniform Commercial Code, and the Mortgagor hereby grants to the Mortgagee a security interest in all furniture, fixtures, equipment and personal property and all other machinery, appliances, furnishings, tools and building materials now owned or hereafter acquired by the Mortgagor, and installed or to be installed in or on the Mortgaged Premises and used or to be used in the management or operation of the Mortgaged Premises, and all substitutions, replacements, additions and accessions thereto, together with all cash and non-cash proceeds thereof. The Mortgagor shall execute, deliver, file and refile any financing statements, continuation statements, or other security agreements that the Mortgagee may require from time to time to confirm the lien of this Mortgage with respect to such property. Without limiting the foregoing, the Mortgagor hereby irrevocably constitutes and appoints the Mortgagee with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority (coupled with an interest) in the place and stead of such Mortgagor and in the name of such Mortgagor or in the Mortgagee's own name, for the Mortgagee to execute, deliver and file such instruments for and on behalf of the Mortgagor. Notwithstanding any release of any or all of that property included in the Mortgaged Premises which is deemed "real property", and proceedings to foreclose this Mortgage or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of the Mortgagor as are now or hereafter secured hereby.


Section 12. Taxes. The Mortgagor shall prepare and timely file all federal, state and local tax returns required to be filed by the Mortgagor and promptly pay and discharge or cause to be promptly paid and discharged all taxes, assessments, municipal or governmental rates, charges, impositions, liens and water and sewer rents or any part thereof, heretofore or hereafter imposed upon the Mortgagor or in respect of any of the Mortgagor's property and assets before the same shall become in default, as


8


well as all lawful claims which, if unpaid might become a lien or charge upon such property and assets or any part thereof, except for those taxes, assessments and other governmental charges then being contested in good faith by the Mortgagor by appropriate proceedings (provided that such contest shall not result in a new lien being placed on any of the Mortgagor's properties or assets or result in any of the Mortgagor's properties or assets being subject to loss or forfeiture as a result of the nonpayment of such items during the continuance of said contest) and for which the Mortgagor has maintained adequate reserves or accrued the estimated liability on the Mortgagor's balance sheets for payment thereof. The Mortgagor shall submit to the Mortgagee, upon request, an affidavit signed by the Mortgagor certifying that, to the best of the Mortgagor's knowledge, all current federal and state information income tax returns have been filed to date and all real property taxes, assessments, governmental charges or levies and other lawful claims with respect to the Mortgagor's properties and assets have been paid to date. Upon the occurrence of an Event of Default, the Mortgagor shall, at the request of the Mortgagee, in addition to the regular payment on the Notes, pay into a non-interest bearing account held by the Mortgagee, at the times when the monthly installment of principal and interest is payable, an amount equal to one-twelfth (1/12th) of the annual estimated real estate taxes levied with respect to the Mortgaged Premises so that funds are available to pay said real estate taxes and assessments when due, and such sum shall be held by the Mortgagee for the payment of such real estate taxes and assessments as they become due. If the amount so estimated shall prove insufficient, then the Mortgagor shall pay the required deficiency upon demand.


Section 13. Change in Laws. During the term of this Mortgage, in the event of the passage after the date of this Mortgage of any law of the State of New Jersey, or any other governmental entity, changing in any way the laws now in force for the taxation of mortgages, or debts secured thereby, for state or local purposes, or the manner of the operation of any such taxes, so as to affect the interest of the Mortgagee, then and in such event, the Mortgagor shall bear and pay the full amount of such taxes, provided that if for any reason payment by the Mortgagor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Loans or indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the obligation secured hereunder, or this Mortgage, or otherwise, the Mortgagee may, at the Mortgagee's option, declare the whole sum secured by this Mortgage, with interest thereon, to be immediately due and payable, or the Mortgagee may, at the Mortgagee's option, pay that amount or portion of such taxes as renders the Loans or indebtedness secured hereby unlawful or usurious, in which event the Mortgagor shall


9


concurrently therewith pay the remaining lawful and nonusurious portion or balance of said taxes.


Section 14. Damage, Destruction and Condemnation.


(i) If all or any part of the Mortgaged Premises shall be damaged or destroyed, or if title to or the temporary use of the whole or any part of any of the Mortgaged Premises shall be taken or condemned by a competent authority for any public use or purpose, there shall be no abatement or reduction in the amounts payable by the Mortgagor hereunder or under the Notes, and the Mortgagor shall continue to be obligated to make such payments.


(ii) If the Mortgaged Premises or any part thereof is partially or totally damaged or destroyed by fire or any other cause, the Mortgagor shall give prompt written notice thereof to the Mortgagee. Upon the occurrence of such damage or destruction to the Mortgaged Premises, where the damage to the Mortgaged Premises exceeds $25,000.00, the Mortgagor shall have no claim against the insurance proceeds, or be entitled to any portion thereof, and all rights to the insurance proceeds are hereby assigned to the Mortgagee to be applied on account of the indebtedness secured hereby that remains unpaid. If the damage exceeds $25,000.00, the Mortgagee shall have the option, in its sole discretion, either (a) to settle and adjust any claim under any insurance policies without the consent of Mortgagor or (b) to allow Mortgagor to settle and adjust such claim without the consent of Mortgagee; provided that in either case Mortgagee shall, and is hereby authorized to, collect and receive any such insurance proceeds; and the ...