SECOND AMENDMENT TO BUSINESS LOAN AGREEMENT AND
RELATED DOCUMENTS
This Second Amendment to Business Loan Agreement and Related Documents
(this "Second Amendment") dated as of September 19, 2002, is by and between
Badger Paper Mills, Inc., a Wisconsin corporation (the "Borrower"), and
Wisconsin Community Bank, Wisconsin Business Bank-Branch (the "Lender"). This
Second Amendment supplements and amends the Business Loan Agreement (as defined
below), the Amendment to Business Loan Agreement and Related Documents as of
November 30, 2001 between the Borrower and the Lender (the "First Amendment")
and the Related Documents (as defined below).
RECITALS
A. The Borrower and the Lender have entered into a Business Loan
Agreement dated November 30, 2001 (as amended by the First Amendment, the
("Business Loan Agreement"), setting forth the terms on which the Lender has
agreed to make certain loans to the Borrower. Pursuant to the Business Loan
Agreement, the Borrower has executed and delivered to the Lender its Promissory
Note in the original principal amount of $5,000,000 (the "Existing Note"), a
Commercial Security Agreement (the "Security Agreement") and a Mortgage (the
"Existing Mortgage"), each dated as of November 30, 2001.
B. In addition to the loans made pursuant to the Existing Note, the
Lender has agreed to make an additional loan to the Borrower in an amount of
$2,000,000.00 (the "New Loan"), for the purpose of capital expenditures,
including but not limited to the purchase of additional equipment, which will
add to or increase the value of the Collateral securing the Borrower's
indebtedness. In connection with this additional loan, the Borrower has executed
and delivered to the Lender a Promissory Note of even date herewith in the
original principal amount of $2,000,000.00 (the "Interim Note").
C. It is intended that the New Loan will, at or prior to maturity of
the Interim Note, be refinanced by a long term loan by the Lender to the
Borrower in the amount of $2,000,000.00, which shall be guaranteed up to 70% of
its principal balance by the United States Department of Agriculture, Rural
Development ("Rural Development"). This long term loan shall be evidenced by a
Promissory Note in substantially the form of Exhibit A attached hereto (the
"Refinancing Note" and, collectively with the Existing Note and the Interim
Note, the "Promissory Note").
D. The Interim Note (and, when issued, the Refinancing Note) will be
secured by the Security Agreement and by a Mortgage of even date herewith by the
Borrower for the benefit of the Lender (the "New Mortgage" and, collectively
with the Existing Mortgage, the "Mortgage"). The Promissory Note, the Security
Agreement and the Mortgage are referred to herein collectively as the "Related
Documents".
E. The Borrower and the Lender have agreed to enter into this Second
Amendment in order to make additional modification and supplements to various
provisions of the Business Loan Agreement, the Related Documents and the First
Amendment.
AGREEMENT
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
1. The foregoing Recitals are true and correct.
2. All references and definitions within the Business Loan Agreement
and the Related Documents to the Business Loan Agreement or any Related Document
shall refer to the Business Loan Agreement or such Related Document as amended
by the First Amendment and as amended hereby.
3. The Business Loan Agreement, the Related Documents and the First
Amendment are amended and/or supplemented as follows:
a. The term "Note", as used in the Business Loan Agreement and
the Security Agreement, means all promissory notes executed by the
Borrower and issued to the Lender together with all renewals,
extensions, modifications, refinancings, consolidations, and
substitutions thereof or therefor, including without limitation the
Existing Note, the Interim Note and the Refinancing Note.
b. The paragraph in the Business Loan Agreement entitled
"Term" is amended in its entirety to read as follows:
"Term. This Agreement shall continue to be effective as of
September 19, 2002 and shall continue in full force and effect
until such time as all of Borrower's Loans in favor of Lender
have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges payable
under this Agreement, or until such time as the parties may
agree in writing to terminate this Agreement."
c. With respect to the paragraph entitled "Financial Covenants
and Ratios" within the section of the Business Loan Agreement entitled
"Affirmative Covenants" that part of such paragraph entitled "Minimum
Income and Cash Flow Requirements" is amended to read as follows:
"Minimum Income and Cash Flow Requirements. Other Cash Flow
Requirements are as follows: MINIMUM DEBT SERVICE COVERAGE
RATIO OF 1.25:1.0 AT FISCAL YEAR-END 2002 AND THEREAFTER. Debt
Service Coverage Ratio is defined as [net income +
depreciation + amortization + interest (less) distributions] /
[prior year's current maturity of long-term debt + interest]."
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d. The Interim Note is (and the Refinancing Note, when issued,
will be ) secured by the Security Agreement and by the New Mortgage. As
further clarification, the Assignments of Life Insurance Policies are
as follows:
Robert A. Olah $ 2,000,000.00 April 16, 2002
Michael J. Bekes $ 500,000.00 January 8, 2002
William Peters $ 500,000.00 November 30, 2001
e. As to Payments on the Interim Note, the Borrower will pay
regular monthly payments of interest only on the outstanding principal
balance for a period not to exceed 12 months. The New Loan will be
renewed at or prior to note maturity for a 12.5 year term upon issuance
of a loan guarantee issued by Rural Development, with 150 regular
monthly principal and interest payments estimated at $17,956.35 based
on an interest rate of Prime + 0.25%. The payment may change from time
to time resulting from changes in the Prime rate index.
f. The First Amendment is amended as follows: the terms
"Related Documents", "Promissory Note" and "Mortgage" as used in the
First Amendment are amended to mean the Related Documents, the
Promissory Note and the Mortgage, respectively, as defined in this
Second Amendment, such that each of the amendments, modifications and
supplements applicable, pursuant to First Amendment, to the "Related
Documents", the "Promissory Note" and the "Mortgage" shall be
applicable to all documents, agreements and instruments included in
such definitions as such definitions have been amended hereby.
4. The Business Loan Agreement, the Related Documents and the First
Amendment shall remain in full force and effect, as modified by this Second
Amendment.
5. To the extent this Second Amendment causes or creates any provisions
of the Business Loan Agreement, the Related Documents or the First Amendment, as
amended hereby, to be or become unenforceable or invalid, or to the extent any
provision of this Second Amendment directly contradicts the purposes of the
Business Loan Agreement or the Related Documents as a whole, rather than amends,
clarifies or makes more specific, the provisions of the Business Loan Agreement
or Related Documents, the original provisions of the Business Loan Agreement
and/or the Related Documents shall apply as fully stated therein.
6. The provisions of this Second Amendment shall inure to the benefit
of, and be binding upon, each of the parties hereto and their respective
successors and assigns.
7. This Second Amendment may be signed in any number of counterparts
with the same effect as if the signature thereto and hereto were upon the same
instrument.
8. This Amendment may be executed and delivered by facsimile
transmission for purposes of confirming execution. The parties hereto agree that
execution and delivery by such method will be confirmed by overnight delivery
express of an original executed counterpart of this Amendment to each of the
other parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date first above written.
BADGER PAPER MILLS, INC.
By: /s/ William H. Peters
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Name: William H. Peters
Title: Chief Financial Officer
and Vice President
WISCONSIN COMMUNITY BANK
By: /s/ Kevin S. Tenpas
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Name: Kevin S. Tenpas
Title: President, Wisconsin
Business Bank Branch
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