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



                                U.S. $12,000,000


                      AMENDED AND RESTATED CREDIT AGREEMENT


                                  by and among


                            BADGER PAPER MILLS, INC.,

              BADGER PAPER MILLS FLEXIBLE PACKAGING DIVISION, INC.
                       (formerly known as PLASTECHS, INC.)


                                       and


                          HARRIS TRUST AND SAVINGS BANK
                            individually and as Agent




                                       and


                   THE FROM TIME TO TIME LENDERS PARTY HERETO




                          Dated as of January 29, 1999




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




<PAGE>




                                TABLE OF CONTENTS

SECTION                              HEADING                                PAGE

SECTION 1.            THE CREDIT...............................................1

       Section 1.1.   Revolving Credit.........................................1
       Section 1.2.   The Loans................................................2
       Section 1.3.   Manner of Borrowing Loans................................2

SECTION 2.            INTEREST.................................................3

       Section 2.1.   Options..................................................3
       Section 2.2.   Domestic Rate Portion....................................3
       Section 2.3.   LIBOR Portions...........................................3
       Section 2.4.   Manner of Rate Selection.................................4
       Section 2.5.   Change of Law............................................4
       Section 2.6.   Unavailability of Deposits or Inability to 
                          Ascertain the Adjusted LIBOR Rate....................5
       Section 2.7.   Taxes and Increased Costs................................5
       Section 2.8.   Funding Indemnity........................................6
       Section 2.9.   Lending Branch...........................................6
       Section 2.10.  Discretion of Lenders as to Manner of Funding............6
       Section 2.11.  Computation of Interest..................................7
       Section 2.12.  Capital Adequacy.........................................7

SECTION 3.            FEES, PAYMENTS, REDUCTIONS, APPLICATIONS 
                          AND NOTATIONS........................................7

       Section 3.1.   Commitment Fee...........................................7
       Section 3.2.   Voluntary Prepayments....................................7
       Section 3.3.   Voluntary Terminations...................................7
       Section 3.4.   Place and Application....................................8
       Section 3.5.   Notations and Requests...................................9

SECTION 4.            THE COLLATERAL...........................................9

       Section 4.1.   Collateral...............................................9
       Section 4.2.   Reaffirmation of Collateral Documents...................10

SECTION 5.            REPRESENTATIONS AND WARRANTIES..........................10

       Section 5.1.   Organization, Power and Compliance......................10
       Section 5.2.   Subsidiaries............................................11
       Section 5.3.   Good Title..............................................11
       Section 5.4.   Regulation U............................................11
       Section 5.5.   Financial Reports.......................................11
       Section 5.6.   Litigation and Taxes....................................12
       Section 5.7.   Affiliates..............................................12

                                      -i-
<PAGE>


       Section 5.8.   ERISA...................................................12
       Section 5.9.   Not an Investment Company...............................12
       Section 5.10.  Compliance with Environmental Laws......................12
       Section 5.11.  Reliance................................................14

SECTION 6.            CONDITIONS PRECEDENT....................................14

       Section 6.1.   All Advances............................................14
       Section 6.2.   Initial Advance.........................................15

SECTION 7.            COVENANTS...............................................16

       Section 7.1.   Maintenance of Business and Compliance with Laws........16
       Section 7.2.   Maintenance of Property.................................16
       Section 7.3.   Taxes...................................................17
       Section 7.4.   Insurance...............................................17
       Section 7.5.   Financial Reports.......................................17
       Section 7.6.   Fixed Charge Coverage Ratio.............................18
       Section 7.7.   Consolidated Tangible Net Worth.........................19
       Section 7.8.   Leverage................................................19
       Section 7.9.   Year 2000 Assessment....................................19
       Section 7.10.  Liens...................................................19
       Section 7.11.  Indebtedness............................................20
       Section 7.12.  Capital Expenditures....................................21
       Section 7.13.  Acquisitions, Investments, Loans, Advances
                          and Guaranties......................................21
       Section 7.14.  Dividends and Certain Other Restricted Payments.........21
       Section 7.15.  Mergers, Consolidations, Leases and Sales...............22
       Section 7.16.  Environmental Laws......................................22
       Section 7.17.  Disclosure of Environmental Matters.....................22
       Section 7.18.  Maintenance of Subsidiaries.............................23
       Section 7.19.  Formation of Subsidiaries...............................23
       Section 7.20.  ERISA...................................................23
       Section 7.21.  Change in Fiscal Year...................................23
       Section 7.22.  Change in the Nature of Business........................23
       Section 7.23.  Use of Loan Proceeds....................................24

SECTION 8.            EVENTS OF DEFAULT AND REMEDIES..........................24


SECTION 9.            THE GUARANTEES..........................................26

       Section 9.1.   The Guarantees..........................................26
       Section 9.2.   Guarantee Unconditional.................................26
       Section 9.3.   Discharge Only Upon Payment in Full; 
                          Reinstatement in Certain Circumstances..............27
       Section 9.4.   Subrogation.............................................27
       Section 9.5.   Waivers.................................................27
       Section 9.6.   Stay of Acceleration....................................28

                                      -ii-
<PAGE>

SECTION 10.           DEFINITIONS.............................................28


SECTION 11.           THE AGENT...............................................35

       Section 11.1.  Appointment and Authorization...........................35
       Section 11.2.  Rights as a Lender......................................35
       Section 11.3.  Standard of Care........................................36
       Section 11.4.  Costs and Expenses......................................36
       Section 11.5.  Indemnity...............................................37

SECTION 12.           MISCELLANEOUS...........................................37

       Section 12.1.  Payments Free of Withholding............................37
       Section 12.2.  Holidays................................................37
       Section 12.3.  No Waiver, Cumulative Remedies..........................38
       Section 12.4.  Waivers, Modifications and Amendments...................38
       Section 12.5.  Costs and Expenses......................................38
       Section 12.6.  Documentary Taxes.......................................38
       Section 12.7.  Survival of Representations, Indemnities and 
                          Agent Provisions....................................39
       Section 12.8.  Construction............................................39
       Section 12.9.  Accounting Principles...................................39
       Section 12.10. Addresses for Notices...................................39
       Section 12.11. Headings................................................40
       Section 12.12. Severability of Provisions..............................40
       Section 12.13. Counterparts............................................40
       Section 12.14. Binding Nature and Governing Law........................40
       Section 12.15. Entire Understanding....................................40
       Section 12.16. Sharing of Set-Off and Information......................40
       Section 12.17. Participations..........................................41
       Section 12.18. Assignment of Commitments by Lenders....................41
       Section 12.19. Set Off.................................................41
       Section 12.20. Terms of Collateral Documents not Superseded............41
       Section 12.21. PERSONAL JURISDICTION...................................41
       SECTION 12.22. WAIVER OF JURY TRIAL....................................42
       SECTION 12.23. ADVICE OF COUNSEL.......................................42

Signature Page................................................................43

EXHIBIT A - Revolving Credit Note
EXHIBIT B - The Subsidiaries
EXHIBIT C - Form of Opinion
EXHIBIT D - Compliance Certificate
EXHIBIT E - Existing Investments
EXHIBIT F - Litigation and Governmental Proceedings

                                     -iii-


<PAGE>



                      AMENDED AND RESTATED CREDIT AGREEMENT



Harris Trust and Savings Bank
Chicago, Illinois

The from time to time lenders party hereto

Ladies and Gentlemen:

         The  undersigned,  Badger  Paper Mills,  Inc., a Wisconsin  corporation
("Badger"),  and  Badger  Paper  Mills  Flexible  Packaging  Division,  Inc.,  a
Wisconsin   corporation   (formerly  known  as  PlasTechs,   Inc.,  a  Wisconsin
corporation)  ("PlasTechs")  (collectively  Badger and PlasTechs are hereinafter
sometimes  referred to as the  "Borrowers"  and  individually  each is sometimes
referred to as a "Borrower"), refer to that certain Credit Agreement dated as of
June 30,  1993,  as amended and  currently in effect  among the  Borrowers,  NEW
Riverview  Holdings,  Inc,  Harris  Trust and Savings  Bank,  as agent,  and the
lenders party thereto (the "Original  Credit  Agreement").  The Borrowers hereby
request that certain  amendments be made to the Original  Credit  Agreement and,
for the sake of clarity and  convenience,  that the Original Credit Agreement be
restated in its  entirety  as so  amended.  This  Amended  and  Restated  Credit
Agreement amends and replaces in its entirety the Original Credit Agreement, and
from the Effective Date all references made to the Original Credit  Agreement in
any Loan Document or in any other instrument or document shall, without more, be
deemed to refer to this Amended and Restated Credit Agreement.  This Amended and
Restated  Credit  Agreement  shall become  effective as of January 29, 1999 (the
"Effective  Date"),  and  supersedes  all  provisions  of  the  Original  Credit
Agreement  as of such date,  upon the  execution  of this  Amended and  Restated
Credit  Agreement  by each of the  parties  hereto  and the  fulfillment  of the
conditions  precedent contained in Section 6.2 hereof.  Harris Trust and Savings
Bank in its  individual  capacity is referred to herein as "Harris",  and in its
capacity  as agent for the Banks  hereunder  is  hereinafter  referred to as the
"Agent."



SECTION 1. THE CREDIT.

       Section 1.1. Revolving Credit. Subject to all of the terms and conditions
hereof,  each Lender,  by its acceptance  hereof,  severally  agrees to extend a
revolving credit (the "Revolving  Credit") to the Borrowers in the amount of its
commitment to extend the Revolving Credit set forth on the applicable  signature
page  hereof  (its  "Commitment"  and  cumulatively  for  all the  Lenders,  the
"Commitments")  (subject to any reductions thereof pursuant to the terms hereof)
prior to the Termination  Date.  Such Revolving  Credit may be availed of by the
Borrowers  in their  discretion  from time to time,  be repaid  and used  again,
during the period from the date hereof to and  including the  Termination  Date.
The Revolving Credit,  subject to all of the terms and conditions hereof, may be
utilized by the  Borrowers in the form of Loans,  all as more fully  

<PAGE>

hereinafter set forth;  provided,  however,  that the aggregate  amount of Loans
available to all the Borrowers outstanding at any one time shall not at any time
exceed the Commitments. The obligations of the Lenders hereunder are several and
not joint and no Lender  shall under any  circumstances  be  obligated to extend
credit hereunder in excess of its Commitment.

       Section  1.2.  The  Loans.  Subject  to all of the terms  and  conditions
hereof,   the  Revolving  Credit  may  be  availed  of  in  the  form  of  loans
(individually  a  "Loan"  and  collectively   the  "Loans").   Each  Loan  which
constitutes  part of the  Domestic  Rate  Position  shall  be in the  amount  of
$100,000 or such  greater  amount  which is a multiple of $100,000 and each Loan
which  constitutes  part of a LIBOR Portion shall be in the amount of $1,000,000
or such greater amount which is a multiple of $100,000.  Each Loan shall be made
pro rata by the Lenders in accordance with the amounts of their Commitments. All
Loans  made to a  Borrower  by a  Lender  shall be  evidenced  by a Note of such
Borrower  (individually a "Note" and  collectively  the "Notes")  payable to the
order of such  Lender in the  amount of its  Commitment,  each Note to be in the
form (with appropriate  insertions) attached hereto as Exhibit A. Without regard
to the face principal  amount of each Note, the actual  principal  amount at any
time outstanding and owing by such Borrower on account thereof during the period
ending  on the  Termination  Date  shall  be the  sum of all  advances  then  or
theretofore made thereon less all payments  actually received thereon during the
same period.

         Section 1.3. Manner of Borrowing Loans. (a) The relevant Borrower shall
give the Agent  notice  (which  may be written  or oral,  but if oral,  promptly
confirmed  in writing) by 12:00 Noon  Chicago  time on any  Business Day of each
request that any Loan be made to such Borrower under the Commitments  specifying
the amount of each such Loan,  and the Agent shall notify  (which may be written
or oral, but if oral,  promptly confirmed in writing) each Lender of its receipt
of each such  notice and the  contents  thereof no later than 2:00 p.m.  Chicago
time on the Business Day any Loan constituting part of the Domestic Rate Portion
is to be made and by 2:00 p.m. Chicago time on the Business Day it receives such
a request for any Loan  constituting a part of a LIBOR  Portion.  Each Loan from
each Lender shall initially constitute part of a Domestic Rate Portion except to
the extent the  relevant  Borrower has  otherwise  timely  elected  otherwise as
provided in Section 2 hereof.  Not later than 3:00 p.m. Chicago time on the date
specified for any Loan to be made by a Lender hereunder,  such Lender shall make
the  proceeds  of its Loan  available  to the Agent in  Chicago  in  immediately
available funds. Subject to all of the terms and conditions hereof, the proceeds
of each Loan shall be made  available to the relevant  Borrower at the office of
the Agent in Chicago  upon receipt by the Agent from each Lender of its pro rata
share of such Loan. The Agent shall give prompt telephonic or telecopy notice to
the Borrower and each Lender by like means of the interest  rate  applicable  to
each Eurodollar Loan (but, if such notice is given by telephone, the Agent shall
confirm  such  rate  in  writing)   promptly  after  the  Agent  has  made  such
determination.

       (b) Unless the Agent shall have been  notified by a Lender  prior to 3:00
p.m.  Chicago time on the date a Loan is to be made  hereunder  that such Lender
does not intend to make its pro rata share of such Loan  available to the Agent,
the Agent may assume that such Lender has made such share available to the Agent
on such date and the Agent may in reliance upon such  assumption  make available
to the relevant Borrower a corresponding amount. If such corresponding amount is
not in fact made  available  to the Agent by such  Lender and the Agent 


                                       -2-
<PAGE>

has made such amount  available  to the  relevant  Borrower,  the Agent shall be
entitled to receive  such amount  from such  Lender  forthwith  upon its demand,
together  with  interest  thereon  in  respect  of each day  during  the  period
commencing on the date such amount was made  available to the relevant  Borrower
and ending on but  excluding  the date the Agent  recovers such amount at a rate
per annum equal to the effective rate charged to the Agent for overnight federal
funds  transactions with member banks of the Federal Reserve System for each day
as determined by the Agent (or in the case of a day which is not a Business Day,
then for the preceding day).

SECTION 2. INTEREST.

       Section 2.1. Options.  Subject to all of the terms and conditions of this
Section  2.1,  portions of the  principal  indebtedness  evidenced  by the Notes
("Portions")  may, at the option of the relevant  Borrower,  bear  interest with
reference to the Domestic Rate (the  "Domestic  Rate Portion") or with reference
to the  Adjusted  LIBOR Rate ("LIBOR  Portions"),  and Portions may be converted
from time to time from one basis to the other. All of the indebtedness evidenced
by the Notes  which is not part of a LIBOR  Portion  shall  constitute  a single
Domestic  Rate  Portion.  All of the  indebtedness  evidenced by the Notes which
bears  interest  with  reference  to a  particular  Adjusted  LIBOR  Rate  for a
particular  Interest  Period shall  constitute a single LIBOR Portion.  Anything
contained herein to the contrary  notwithstanding,  there shall not be more than
four LIBOR Portions  applicable to the Revolving Credit at any one time and each
Lender shall have a ratable interest in each Portion.  The Borrowers  promise to
pay interest on each Portion at the rates and times specified in this Section 2.

       Section 2.2. Domestic Rate Portion.  The Domestic Rate Portion shall bear
interest  (which the Borrowers  promise to pay at the times herein  provided) at
the rate per annum  equal to the  Domestic  Rate as in effect from time to time,
provided  that if a Domestic Rate Portion is not paid when due (whether by lapse
of time, acceleration or otherwise), such Portion shall bear interest (which the
Borrowers promise to pay at the times hereinafter  provided),  whether before or
after  judgment,  and  until  payment  in full  thereof,  at the rate per  annum
determined  by adding 4% to the  Domestic  Rate as in effect  from time to time.
Interest on the Domestic Rate Portions shall be payable monthly on the first day
of each  calendar  month in each year and at maturity of the Notes and  interest
after maturity shall be due and payable upon demand.

       Section 2.3.  LIBOR  Portions.  Each LIBOR  Portion  shall bear  interest
(which the  Borrowers  promise  to pay at the times  herein  provided)  for each
Interest  Period  selected  therefor at a rate per annum equal to the sum of the
Adjusted  LIBOR  Rate for such  Interest  Period  plus  the  Eurodollar  Margin,
provided  that if any LIBOR  Portion is not paid when due  (whether  by lapse of
time,  acceleration  or otherwise),  such Portion shall bear interest (which the
Borrowers promise to pay at the times hereinafter  provided),  whether before or
after  judgment,  and until  payment  in full  thereof,  through  the end of the
Interest  Period then  applicable  thereto at the rate per annum  determined  by
adding 4% to the interest rate otherwise applicable thereto and effective at the
end of such  Interest  Period,  and such LIBOR Portion  shall  automatically  be
converted into and added to the Domestic Rate Portion and shall  thereafter bear
interest at the interest  rate  applicable  to the Domestic  Rate Portion  after
default. Interest on each LIBOR Portion shall be due and payable on the last day
of each Interest Period applicable thereto, and interest after maturity shall be
due and payable upon demand.  The relevant Borrower shall notify 



                                       -3-
<PAGE>

the  Agent on or before  12:00  noon  Chicago  time on the  third  Business  Day
preceding the end of an Interest  Period  applicable to a LIBOR Portion  whether
such  LIBOR  Portion  is to  continue  as a LIBOR  Portion,  in which  event the
relevant  Borrower  shall notify the Agent of the new Interest  Period  selected
therefor,  and in the event the  relevant  Borrower  shall fail to so notify the
Agent, such LIBOR Portion shall automatically be converted into and added to the
Domestic  Rate Portion as of and on the last day of such  Interest  Period.  The
Agent shall notify each Lender of each notice received from a Borrower  pursuant
to the  foregoing  provisions  no later than 2:00 p.m.  Chicago  time.  Anything
contained herein to the contrary notwithstanding,  the obligation of the Lenders
to  create,  continue  or  effect  by  conversion  any  LIBOR  Portion  shall be
conditioned  upon the fact that at the time no Default or Event of Default shall
have  occurred and be  continuing.  Each LIBOR Portion shall be in the amount of
$1,000,000 or such greater amount which is an integral multiple of $100,000.

       Section 2.4. Manner of Rate Selection. The relevant Borrower shall notify
the Agent by 12:00 Noon Chicago time at least three  Business  Days prior to the
date upon which it requests  that any LIBOR  Portion be created or that any part
of the Domestic  Rate Portion be converted  into a LIBOR Portion (such notice to
specify in each  instance the amount  thereof and the Interest  Period  selected
therefor)  and the Agent  shall  advise  each Lender of each such notice by 2:00
p.m.  Chicago  time on the same  Business Day it receives  such  notice.  If any
request is made to convert a LIBOR Portion into the Domestic Rate Portion,  such
conversion  shall only be made so as to become  effective  as of the last day of
the  Interest  Period  applicable  thereto.   All  requests  for  the  creation,
continuance or conversion of Portions under this Agreement shall be irrevocable.
Such requests may be written or oral and the Agent is hereby authorized to honor
telephonic requests for creations,  continuances and conversions  received by it
from any person the Agent reasonably  believes to be a person  authorized to act
on behalf of such Borrower  hereunder,  the Borrowers  hereby  indemnifying  the
Agent and the Lenders from any liability or loss ensuing from so acting.

       Section 2.5. Change of Law.  Notwithstanding any other provisions of this
Agreement or the Notes,  if at any time a Lender  shall  determine in good faith
that  any  change  in  applicable  laws,  treaties  or  regulations  or  in  the
interpretation  thereof  makes it unlawful for such Lender to create or continue
to maintain LIBOR  Portions,  it shall promptly so notify the Agent (which shall
in turn promptly  notify the Borrowers and the other Lenders) and the obligation
of such  Lender to create,  continue or maintain  any LIBOR  Portion  under this
Agreement  shall  terminate  until it is no longer  unlawful  for such Lender to
create,  continue or maintain LIBOR Portions. The Borrowers on demand, shall, if
the continued  maintenance of a LIBOR Portion is unlawful,  thereupon prepay the
outstanding  principal amount of the LIBOR Portions,  together with all interest
accrued  thereon and all other  amounts  payable to the  affected  Lenders  with
respect thereto under this Agreement,  provided, however, that the Borrowers may
instead elect to convert the principal amount of the affected LIBOR Portion into
the  Domestic  Rate  Portion,  subject  to the  terms  and  conditions  of  this
Agreement.  If the Lender or Lenders  affected by a change in law or  regulation
can avoid the effect of such change by changing its lending or funding branch it
shall do so, provided that the same can be accomplished  without disadvantage to
it.



                                      -4-
<PAGE>

       Section 2.6.  Unavailability  of Deposits or  Inability to Ascertain  the
Adjusted LIBOR Rate.  Notwithstanding  any other  provision of this Agreement or
the Notes,  if prior to the  commencement  of any Interest  Period,  the Lenders
shall  determine  that United States dollar  deposits in the amount of any LIBOR
Portion scheduled to be outstanding  during such Interest Period are not readily
available  to such  Lenders in the offshore  interbank  market after  reasonable
effort to determine  whether such  deposits  are so  available,  the Agent shall
promptly  give notice  thereof to the  Borrowers  and each other  Lender and the
obligations of the Lenders to create, continue or effect by conversion any LIBOR
Portion in such amount and for such Interest Period shall terminate until United
States dollar  deposits in such amount and for the Interest Period selected by a
Borrower shall again be readily available in the offshore interbank market.

       Section  2.7.  Taxes  and  Increased  Costs.  With  respect  to the LIBOR
Portions,  if any Lender  shall  determine  in good faith that any change in any
applicable law, treaty, regulation or guideline (including,  without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law,  treaty,  regulation  or  guideline,  or any  interpretation  of any of the
foregoing by any governmental  authority charged with the administration thereof
or any  central  bank or  other  fiscal,  monetary  or  other  authority  having
jurisdiction over such Lender or its lending branch or the Portions contemplated
by this Agreement (whether or not having the force of law) shall:

              (i) impose,  increase,  or deem  applicable  any reserve,  special
       deposit or similar  requirement against assets held by, or deposits in or
       for the  account  of, or loans by, or any other  acquisition  of funds or
       disbursements  by,  such  Lender  which  is not in any  instance  already
       accounted for in computing the Adjusted LIBOR Rate;

              (ii)  subject  such  Lender,  the LIBOR  Portions or a Note to the
       extent  it  evidences  such  Portions,  to any  tax  (including,  without
       limitation,  any United States interest  equalization  tax or similar tax
       however  named   applicable  to  the   acquisition  or  holding  of  debt
       obligations  and any interest or penalties with respect  thereto),  duty,
       charge,  stamp tax,  fee,  deduction  or  withholding  in respect of this
       Agreement,  any LIBOR Portion or a Note to the extent it evidences such a
       Portion,  except  such taxes as may be measured by the overall net income
       or gross  receipts of such Lender or its lending  branches and imposed by
       the  jurisdiction,  or any  political  subdivision  or  taxing  authority
       thereof, in which such Lender's principal executive office or its lending
       branch is located;

              (iii)  change the basis of taxation of payments of  principal  and
       interest due from the Borrowers to such Lender  hereunder or under a Note
       to the extent it evidences any LIBOR  Portion  (other than by a change in
       taxation of the overall net income or gross receipts of such Lender); or

                  (iv)  impose on such Lender any  penalty  with  respect to the
         foregoing  or  any  other  condition  regarding  this  Agreement,   its
         disbursement,  any LIBOR  Portion or a Note to the extent it  evidences
         any LIBOR Portion;

and such Lender shall  determine  that the result of any of the  foregoing is to
increase  the cost  (whether  by  incurring  a cost or adding to a cost) to such
Lender of creating or maintaining  any 


                                      -5-
<PAGE>

LIBOR  Portion  hereunder  or to reduce  the  amount of  principal  or  interest
received or  receivable by such Lender  (without  benefit of, or credit for, any
prorations,  exemption,  credits or other offsets available under any such laws,
treaties,   regulations,   guidelines  or  interpretations  thereof),  then  the
Borrowers  shall pay on demand to the Agent for the  account of such Lender from
time to time as specified by such Lender such additional  amounts as such Lender
shall  reasonably  determine are  sufficient to compensate  and indemnify it for
such  increased  cost or  reduced  amount.  If a Lender  makes  such a claim for
compensation,  it shall provide to the Borrowers a certificate setting forth the
computation  of the  increased  cost or reduced  amount as a result of any event
mentioned herein and such certificate shall be deemed prima facie correct.  If a
Lender  can avoid the  effect of any such  change by  changing  its  lending  or
funding  branch,  it shall do so provided  that it will not, in the  judgment of
such Lender, be otherwise disadvantageous to such Lender.

       Section 2.8. Funding  Indemnity.  In the event any Lender shall incur any
loss, cost or expense (including,  without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired or  contracted  to be  acquired by such Lender to fund or maintain  its
part of any LIBOR  Portion or the relending or  reinvesting  of such deposits or
other funds or amounts paid or prepaid to such Lender), as a result of:

              (i) any  payment of a LIBOR  Portion on a date other than the last
       day of the then applicable Interest Period for any reason, whether before
       or after  default,  and  whether or not such  payment is  required by any
       provisions of the Agreement; or

              (ii) any failure by any  Borrower to create,  borrow,  continue or
       effect by  conversion a LIBOR  Portion on the date  specified in a notice
       given pursuant to this Agreement;

then upon the demand of such  Lender,  the  relevant  Borrower  shall pay to the
Agent for the account of such Lender such amount as will  reimburse  such Lender
for such loss, cost or expense.  If a Lender requests such a  reimbursement,  it
shall  provide  the  relevant  Borrower  with a  certificate  setting  forth the
computation  of the  loss,  cost  or  expense  giving  rise to the  request  for
reimbursement and such certificate shall be deemed prima facie correct.

       Section 2.9.  Lending  Branch.  Each Lender may, at its option,  elect to
make, fund or maintain its loans hereunder at the branches or offices  specified
on the  signature  pages  hereof or at such other of its  branches or offices as
such Lender may from time to time elect.

       Section   2.10.   Discretion   of  Lenders  as  to  Manner  of   Funding.
Notwithstanding  any provision of this  Agreement to the  contrary,  each Lender
shall be  entitled  to fund and  maintain  its funding of all or any part of its
share of its Notes in any manner it sees fit, it being understood, however, that
for the  purposes of this  Agreement  all  determinations  hereunder  (including
determinations  under Sections 2.6, 2.7 and 2.8 hereof) shall be made as if each
such Lender had actually  funded and  maintained  each LIBOR Portion during each
Interest  Period  applicable  thereto  through  the  purchase of deposits in the
offshore  interbank  market in the  amount of its share of such  LIBOR  Portion,
having a maturity  corresponding to such Interest Period and bearing an interest
rate equal to LIBOR for such Interest Period.



                                      -6-
<PAGE>

       Section  2.11.  Computation  of  Interest.  All interest on the Notes and
unless otherwise stated herein, all fees, charges and commissions due hereunder,
shall be  computed  on the basis of a year of 360 days for the actual  number of
days elapsed.

       Section 2.12.  Capital  Adequacy.  If any Lender shall determine that the
adoption,  after the date  hereof,  of any  applicable  law,  rule,  regulation,
guideline or order  regarding  capital  adequacy,  or any change in any existing
law, rule,  regulation,  guideline or order, or any change in the interpretation
or  administration  thereof  by any  governmental  authority,  central  bank  or
comparable agency charged with the  interpretation or administration  thereof or
compliance by such Lender (or its lending  office) with any request or directive
regarding  capital adequacy (whether or not having the force of law) of any such
authority,  central bank or comparable  agency,  has or would have the effect of
reducing the rate of return on such  Lender's  capital as a  consequence  of its
obligations  hereunder or credit  extended by it hereunder to a level below that
which  such  Lender  could have  achieved  but for such law,  rule,  regulation,
guideline,  order, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material,  then from time to time as  specified by such Lender the  Borrowers
shall pay such  additional  amount or amounts as will compensate such Lender for
such  reduction.  A certificate of any Lender claiming  compensation  under this
Section 2.12 and setting forth the additional amount or amounts to be paid to it
hereunder  in  reasonable  detail  shall be prima  facie  evidence  thereof.  In
determining  such  amount,  such  Lender may use any  reasonable  averaging  and
attribution methods.

SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.

       Section 3.1.  Commitment  Fee. For the period from the date hereof to and
including the  Termination  Date,  the Borrowers  shall pay to the Agent for the
account  of the  Lenders  a  commitment  fee at the rate of 1/2 of 1% per  annum
(computed  on the  basis  of a year of 360 days for the  actual  number  of days
elapsed) on the average daily unused amount of the Commitments  hereunder.  Such
fee shall be payable  quarterly in arrears on the last day of each March,  June,
September  and  December  in each year  (commencing  March 31,  1999) and on the
Termination  Date,  unless the Commitments are terminated in whole on an earlier
date, in which event the  commitment fee for the period to but not including the
date of such termination in whole shall be paid on the date of such termination.

         Section  3.2.  Voluntary  Prepayments.  The  Borrowers  shall  have the
privilege of  prepaying  the Notes in whole or in part (but if in part then in a
minimum  amount of  $100,000  and in an  amount  such  that the  minimum  amount
required  pursuant to Section 1.2 hereof remains  outstanding)  at any time upon
one  Business  Day's  prior  notice  to the Agent  (such  notices,  if  received
subsequent  to 12:00 Noon  Chicago  time on a given day, to be treated as though
received  at the  opening of business  on the next  Business  Day),  which shall
promptly  so notify the  Lenders,  by paying to the Agent for the account of the
Lenders the principal amount to be prepaid and (i) if such prepayment  prepays a
Note in full, accrued interest thereon to the date fixed for prepayment and (ii)
any amount due the Lenders under Section 2.8 hereof.

       Section  3.3.  Voluntary  Terminations.  The  Borrowers  shall  have  the
privilege at any time,  upon five (5) Business  Days' prior written joint notice
to the Agent (which shall promptly



                                      -7-
<PAGE>

notify the Lenders) to ratably  terminate  the  Commitments  in whole or in part
(but if in part then in a minimum  amount of $1,000,000 or an integral  multiple
thereof). Not later than the termination date stated in such notice, there shall
be made such  payments to the Agent as may be necessary to reduce the sum of the
aggregate  outstanding principal amounts of the Notes to the amount to which the
Commitments  have been  reduced,  together with (x) any amount due under Section
2.8 hereof and (y) in the case of a termination in whole, all interest, fees and
other amounts due on the  Obligations.  No termination of the Commitments may be
reinstated.

       Section 3.4. Place and Application.  All payments of principal,  interest
and  fees  shall be made to the  Agent at its  office  111 West  Monroe  Street,
Chicago,  Illinois  (or at  such  other  place  as the  Agent  may  specify)  in
immediately available and freely transferable funds at the place of payment. All
such payments shall be made without setoff or counterclaim and without reduction
for,  and free from,  any and all  present  or future  taxes,  levies,  imposts,
duties, fees, charges, deductions,  withholdings,  restrictions or conditions of
any  nature  imposed  by any  government  or  political  subdivision  or  taxing
authority thereof.  Payments received by the Agent after 12:00 Noon Chicago time
shall be deemed received as of the opening of business on the next Business Day.
Badger  hereby  authorizes  the Agent,  if and to the extent any  payment by any
Borrower is not made when due under this Agreement or under any of the Notes, to
charge from time to time against  Badger's  account number 182-080-2 with Harris
Trust and  Savings  Bank any  amount so due.  Except  as  herein  provided,  all
payments  shall be received by the Agent for the ratable  account of the Lenders
and shall be promptly  distributed  by the Agent ratably to the Lenders.  Unless
the relevant Borrower otherwise directs,  payments shall be deemed first applied
to the Domestic Rate Portion  until  payment in full  thereof,  with any balance
applied to the  applicable  LIBOR  Portions in the order in which their Interest
Periods expire. Any amount prepaid on the Notes may, subject to all of the terms
and conditions  hereof,  be borrowed,  repaid and borrowed  again.  All payments
(whether  voluntary  or  required)  shall be  accompanied  by any amount due the
Lenders  under Section 2.8 hereof,  but no acceptance of such a payment  without
requiring payment of amounts due under Section 2.8 shall preclude a later demand
by the  Lenders  for any amount due them  under  Section  2.8 in respect of such
payment.

       Anything contained herein to the contrary  notwithstanding,  all payments
and collections  received in respect of the indebtedness  evidenced by the Notes
and all proceeds of the Collateral received,  in each instance,  by the Agent or
any of the Lenders after the occurrence of an Event of Default shall be remitted
to the Agent and distributed as follows:

              (a) first, to the payment of any reasonable  outstanding costs and
       expenses  incurred  by the Agent in  monitoring,  verifying,  protecting,
       preserving  or enforcing the liens on the  Collateral  or in  protecting,
       preserving  or enforcing  rights  under this  Agreement,  the  Collateral
       Documents,  and the Notes and in any event including all reasonable costs
       and expenses of a character  which the Borrowers have agreed to pay under
       Section  11.4 hereof  (such funds to be retained by the Agent for its own
       account  unless it has  previously  been  reimbursed  for such  costs and
       expenses by the Lenders, in which event such amounts shall be remitted to
       the  Lenders  to  reimburse  them for  payments  theretofore  made to the
       Agent);

                                      -8-
<PAGE>

              (b) second,  to the payment of any  outstanding  interest or other
       fees or  amounts  due under the Notes or this  Agreement  other  than for
       principal,  ratably as among the Agent and the Lenders in accord with the
       amount of such  interest and other fees or amounts  owing each;  provided
       that any proceeds  derived from the sale or other  disposition of the (i)
       Oconto Falls Facility  shall first be applied to reduce the  indebtedness
       of the Oconto Falls Financing  including the repayment to any draw on any
       letter of credit issued to support the Oconto Falls  Financing,  and (ii)
       Peshtigo  Facility shall first be applied to reduce the  indebtedness  of
       the Peshtigo financing  including the repayment of any draw on any letter
       of credit issued to support the Peshtigo Financing;

              (c) third,  to the  payment  of the  principal  of the Notes,  the
       aggregate  amount paid to the Lenders to be  allocated  pro rata as among
       the Lenders in accord with the then respective aggregate unpaid principal
       balances of the Notes;

              (d) fourth,  to the Agent and the  Lenders  ratably in accord with
       the amounts of any other indebtedness,  obligations or liabilities of the
       Borrowers  owing to each of them and secured by the Collateral  Documents
       (other  than those  described  in clause (e) below)  unless and until all
       such  indebtedness,  obligations and liabilities have been fully paid and
       satisfied; and

              (e) fifth,  to the  Borrowers or whoever may be lawfully  entitled
       thereto.

       Section 3.5. Notations and Requests. All advances made against the Notes,
the status of all amounts  evidenced  by the Notes as  constituting  part of the
Domestic  Rate Portion or a LIBOR Portion and the rates of interest and Interest
Periods  applicable to such  Portions  shall be recorded by the Lenders on their
books or, at their option in any  instance,  endorsed on the reverse side of the
Notes and the unpaid principal  balances and status,  rates and Interest Periods
so recorded or  endorsed  by the  Lenders  shall be prima facie  evidence in any
court or other  proceeding  brought to enforce the Notes of the principal amount
remaining unpaid thereon, the status of the borrowings evidenced thereby and the
interest rates and Interest Periods applicable thereto. Prior to any negotiation
of any Note,  the Lender  holding such Note shall endorse  thereon the status of
all amounts  evidenced thereby as constituting part of the Domestic Rate Portion
or LIBOR Portion and the rates of interest and the Interest  Periods  applicable
thereto.

SECTION 4. THE COLLATERAL.

       Section 4.1.  Collateral.  The Notes and the other  Obligations  shall be
secured  by (i) valid  and  perfected  first  liens on all  inventory,  accounts
receivable, general intangibles, instruments, machinery and equipment of Badger,
PlasTechs and Peshtigo  Power,  (ii) the real property and fixtures of PlasTechs
in Oconto  Falls,  Wisconsin  and (iii)  investments  of  Badger  consisting  of
Marketable  Securities (the foregoing being hereinafter referred to collectively
as the "Collateral"), and each Borrower agrees that it will from time to time at
the  request  of the Agent or any  Lender  execute  and  deliver,  and cause its
Subsidiaries to execute and deliver,  such documents and do such acts and things
as the Agent or any Lender  may  reasonably  request in order to provide  for or
perfect such liens.



                                      -9-
<PAGE>

       Section 4.2.  Reaffirmation of Collateral  Documents.  The Borrowers have
heretofore  executed and delivered to the Agent the  Collateral  Documents.  The
Borrowers hereby agree that  notwithstanding  the execution and delivery of this
Agreement,  each of the Collateral  Documents  shall be and remain in full force
and  effect  and that any  rights  and  remedies  of the Agent  and the  Lenders
thereunder,  obligations  of the Borrowers  thereunder and any liens or security
interests  created or provided for thereunder  shall be and remain in full force
and effect and shall not be affected,  impaired or discharged  thereby and shall
secure all of its indebtedness, obligations and liabilities to the Agent and the
Lenders  under the Original  Credit  Agreement  as amended and restated  hereby.
Nothing  herein  contained  shall in any manner affect or impair the priority of
the liens and security  interests  created and  provided  for by the  Collateral
Documents as to the indebtedness  which would be secured thereby prior to giving
effect to this Amendment.  Without limiting the foregoing, each of the Borrowers
acknowledges  and  agrees  that  all  of  its   indebtedness,   obligations  and
liabilities  to the  Agent  and the  Lenders  pursuant  to the  Original  Credit
Agreement as amended and restated  hereby,  including  without  limitation,  all
principal  of and  interest  on the Notes (as  defined  in the  Original  Credit
Agreement as amended and restated hereby) and Reimbursement Obligations, whether
presently existing or hereafter arising,  shall constitute "Secured Obligations"
as  defined in each of the  Security  Agreements  and shall be  secured  by, and
entitled to all of the benefits of, the liens and security  interest created and
provided for under the Security  Agreements.  In  furtherance  of the foregoing,
each  Borrower  hereby  grants to the Agent for the benefit of the Lenders,  and
hereby  agrees that the Agent for the benefit of the Lenders  shall  continue to
have a  continuing  security  interest  in, all and  singular of the  Borrowers'
receivables,  general intangibles,  accounts receivable,  machinery,  equipment,
inventory, books and records, documents,  accessions and additions to all of the
foregoing  and all  products  and  proceeds  of each of the  foregoing,  and all
proceeds or collection  of any of the foregoing and all of the other  collateral
described  or referred to in the granting  clauses of the  Security  Agreements,
each and all of which  granting  clauses are hereby  incorporated  by  reference
herein in their  entirety.  The  foregoing  grant  shall be in  addition  to and
supplemental of and not in  substitution  for the grant by each of the Borrowers
under their respective Security  Agreements,  and shall not affect or impair the
lien or priority of the Security Agreements in the collateral subject thereto or
the indebtedness secured thereby.



SECTION 5. REPRESENTATIONS AND WARRANTIES.

       Each Borrower represents and warrants to the Lenders as follows:

       Section 5.1.  Organization,  Power and Compliance.  Each Borrower is duly
organized and existing under the laws of the state of its incorporation, is duly
licensed or  qualified  to do  business in each state where any of the  property
subject  to the lien of the  Collateral  Documents  is  located  or where a lien
thereon is required to be perfected  or enforced,  or where the failure to be so
licensed or  qualified  would have a material  adverse  effect on the  business,
operations  or assets of such Borrower or any  Subsidiary  and has all corporate
power,  and  licenses,  franchises  and other  governmental  authorizations  and
approvals  necessary to carry on its present  business.  Each  Borrower has full
right, power and authority to enter into this Agreement,  to make the borrowings
herein  provided  for,  to issue its Notes in evidence  thereof,  to execute and
deliver the


                                      -10-
<PAGE>

Collateral  Documents executed by it, to perform each and all of the matters and
things herein and therein  provided  for, and to carry on its present  business.
This  Agreement,  the  Notes  and  such  Collateral  Documents  have  been  duly
authorized,  executed and  delivered by such Borrower and  constitute  valid and
binding obligations of such Borrower enforceable in accordance with their terms.
This  Agreement,  the Notes and such  Collateral  Documents do not, nor will the
performance  or observance by a Borrower of any of the matters and things herein
or therein  provided  for,  contravene  any  provision  of law or any charter or
by-law provision of such Borrower or any covenant,  indenture or agreement of or
affecting a Borrower or any of its properties.

       Section 5.2. Subsidiaries. Each Subsidiary is duly organized and existing
under the laws of the  jurisdiction in which it was  incorporated,  has full and
adequate  corporate power and licenses and franchises  necessary to carry on its
business as now conducted and is duly licensed or qualified in all jurisdictions
where the failure to be so qualified would have a material adverse effect on its
business,  operations or assets. All of the outstanding  capital stock of all of
the Subsidiaries has been validly issued, is fully paid and  nonassessable  and,
to the extent and in the  percentages set forth in Exhibit B, is, as of the date
hereof, owned by Badger or one or more of the Subsidiaries free and clear of all
liens, security interest, charges and encumbrances. As of the date hereof, there
are outstanding no commitments or other  obligations of any Subsidiary to issue,
and no options, warrants or other rights of any individual or entity to acquire,
any  shares  of any  class of  capital  stock  of any  Subsidiary.  All  present
Subsidiaries are listed on Exhibit B.

       Section 5.3.  Good Title.  As of the date hereof,  each Borrower has good
and defensible  title to its respective  assets as reflected on the consolidated
balance  sheet of the Borrowers  and the  Subsidiaries  dated as of December 31,
1997 (except for sales by the  Borrowers and such  Subsidiaries  in the ordinary
course of their  respective  businesses),  subject  to no liens or  encumbrances
other than such thereof as are permitted by Section 7.10 hereof.

       Section  5.4.  Regulation  U. No Borrower  is engaged in the  business of
extending credit for the purpose of purchasing or carrying margin stocks (within
the meaning of  Regulation U of the Board of  Governors  of the Federal  Reserve
System),  and no part of the  proceeds  of any  Loan  hereunder  will be used to
purchase or carry any margin stock or extend credit to others for the purpose of
purchasing or carrying any margin stock.

       Section 5.5. Financial  Reports.  The audit report of Badger for the year
ended December 31, 1997,  including a  consolidated  and  consolidating  balance
sheets as of December 31, 1997 and a  consolidated  statement of profit and loss
for the 12 months  ended said date,  prepared  by Grant  Thornton  LLP,  and the
interim  consolidated  and  consolidating  balance  sheets  of  Badger  and  the
Subsidiaries  as at  September  30,  1998  and  consolidated  and  consolidating
statements of profit and loss for the nine months then ended  prepared by Badger
and  heretofore  furnished to the Lenders,  all as  heretofore  presented to the
Lenders,  fairly present the financial  condition of Badger and the Subsidiaries
as at said dates and the results of operations for the periods covered  thereby.
Since  December 31,  1997,  there have been no material  adverse  changes in the
condition,  financial  or  otherwise,  or business  prospects  of Badger and the
Subsidiaries  taken  as  a  whole.  As  of  the  date  hereof,  Badger  and  the
Subsidiaries  have


                                      -11-
<PAGE>

no known contingent  liabilities  which are material to Badger or any Subsidiary
other than as indicated on said financial statements.

       Section  5.6.  Litigation  and  Taxes.  Except as set forth on  Exhibit F
hereto,  there is no litigation or governmental  proceeding pending,  nor to the
best  knowledge  of  any  Borrower  threatened,  against  any  Borrower  or  any
Subsidiary  which if adversely  determined  would result in any material adverse
change in the financial  condition or properties,  business or operations of any
Borrower or any  Subsidiary.  The federal  income tax returns  applicable to the
Borrowers and any Subsidiaries for the tax year ended December 31, 1994, and for
all tax years ended  prior to said date have been  examined  and any  additional
assessments  in  connection  with such  years  have  been  paid and no  material
objections to or  controversies  in respect of the United States  federal income
tax  returns of the  Borrowers  or any  Subsidiary  are  pending or, to the best
knowledge of the  Borrowers  threatened.  No  authorization,  consent,  license,
exemption of filing or registration  with any court or governmental  department,
agency or instrumentality,  is necessary to the valid execution and delivery of,
or presently  necessary to the performance by any Borrower and the  Subsidiaries
of, this  Agreement,  the Notes and the  Collateral  Documents,  except for such
thereof as have been obtained and are in full force and effect.

       Section 5.7. Affiliates.  No Borrower or any Subsidiary is a party to any
contracts or agreements with any of its Affiliates on terms and conditions which
are less favorable to such Borrower or such  Subsidiary  than would be usual and
customary  in  similar  contracts  or  agreements  between  persons,   firms  or
corporations not affiliated with each other.

       Section 5.8.  ERISA.  Each Borrower and ERISA Affiliate are in compliance
in all material respects with the IRC and ERISA to the extent applicable to them
and have received no notice to the contrary from the Internal  Revenue  Service,
the Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC"); as
of December 31, 1997, the liability of each Borrower and ERISA  Affiliate to the
PBGC in respect of unfunded  employee  benefit plan  liabilities  would not have
been in excess of $100,000 if all employee  benefit plans  covering any officers
or employees of the Borrowers  and ERISA  Affiliates  had been  terminated as of
such date. No Borrower nor any ERISA Affiliate has (i) failed to make a required
contribution  or  payment  of a  "multiemployer  plan" (as  defined  in  Section
4001(a)(3)  of  ERISA) or (ii)  made a  complete  or  partial  withdrawal  under
Sections  4203 or 4205 of ERISA from a  multiemployer  plan. No Borrower nor any
ERISA  Affiliate  maintains or contributes to any employee  welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after  termination  of employment  (other than as required  under Section 601 of
ERISA) which could result in a material obligation to pay money.

       Section 5.9. Not an  Investment  Company.  No Borrower is an  "investment
company"  nor a company  "controlled"  by an  "investment  company  organized or
otherwise  created under the laws of the United States or of a State" within the
meaning of the Investment Company Act of 1940, as amended.

       Section 5.10.  Compliance with Environmental Laws. (a) To the best of the
Borrowers'  knowledge,  the business and  operation of the  Borrowers  and their
Subsidiaries comply in all material respects with all applicable federal, state,
regional,  county and local laws,  statutes,  rules, 



                                      -12-
<PAGE>

regulations and ordinances relating to public health, safety or the environment,
including, without limitation,  relating to releases,  discharges,  emissions or
disposals  to air,  water,  land or  groundwater,  to the  withdrawal  or use of
groundwater,  to the use,  handling  or disposal  of  polychlorinated  biphenyls
(PCB's), asbestos or urea formaldehyde,  to the treatment,  storage, disposal or
management of hazardous substances  (including,  without limitation,  petroleum,
its  derivatives,  by-products  or other  hydrocarbons),  to  exposure to toxic,
hazardous  or other  controlled,  prohibited  or  regulated  substances,  to the
transportation,  storage,  disposal,  management or release of gaseous or liquid
substances, and any regulation, order, injunction, judgment, declaration, notice
or  demand  issued   thereunder  (all  of  the  foregoing   being   collectively
"Environmental Laws"), except to the extent that such noncompliance could not be
reasonably  expected  to  have  a  material  adverse  effect  on  the  business,
operations,  properties,  assets or condition  (financial  or  otherwise) of the
Borrowers and Subsidiaries.

       (b) Except as  specifically  disclosed  pursuant  to Section  7.17 below,
within the past five years the Borrowers and their  Subsidiaries have not given,
nor have they been required to give, nor have they received, any written notice,
letter, citation, order, warning, complaint, inquiry, claim or demand (hereafter
"Demand") that: (i) any Borrower or any Subsidiary has violated,  or is about to
violate,  any  Environmental  Law; (ii) there has been a release,  or there is a
threat  of  release,  of  a  non-diminimus   quantity  of  hazardous  substances
(including,   without   limitation,   petroleum,   its   by-products   or  other
hydrocarbons)  from any  Borrower's or any  Subsidiary's  property,  facilities,
equipment  or  vehicles  or  previously  owned or leased  properties;  (iii) any
Borrower  or any  Subsidiary  may be or is  liable,  in whole  or in  part,  for
material  costs of  cleaning  up,  remediating  or  responding  to a release  of
hazardous substances (including, without limitation, petroleum, its derivatives,
by-products  or other  hydrocarbons);  (iv) any  Borrower's or any  Subsidiary's
property  or  assets or  previously  owned or leased  properties  or assets  are
subject to a lien in favor of any governmental  entity for any liability,  costs
or  damages,  under  any  federal,  state or local  environmental  law,  rule or
regulation  arising  from,  or costs  incurred  by such  governmental  entity in
response to, a release of a hazardous substance (including,  without limitation,
petroleum, its derivatives, by-products or other hydrocarbons).

       (c) Except as disclosed  pursuant to Section 7.17 below,  no property now
or  previously  owned or leased by any Borrower or any  Subsidiary  is listed or
proposed for listing on the National  Priorities List pursuant to CERCLA, on the
or on any similar state list of sites requiring investigation or clean-up.

       (d)  There  are  no  underground  storage  tanks,  active  or  abandoned,
including  petroleum  storage tanks,  on or under any property now or previously
owned or  leased  by any  Borrower  or any  Subsidiary  that,  singly  or in the
aggregate,  have,  or may  reasonably  be expected to have,  a material  adverse
effect on the financial condition,  operation,  assets, business,  properties or
prospects of the Borrowers and their Subsidiaries.

       (e) No Borrower nor any Subsidiary  has directly  transported or directly
arranged for the  transportation  of any  hazardous  substances  to any location
which is listed or proposed for listing on the National Priorities List pursuant
to CERCLA,  on the CERCLIS or on any similar  state list or which is the subject
of federal, state or local enforcement actions or other investigations which may
reasonably  be expected to lead to material  claims  against any Borrower or any
Subsidiary 


                                      -13-
<PAGE>

for any remedial work, damage to natural resources or personal injury, including
claims under CERCLA.

       (f) There are no polychlorinated biphenyls or friable asbestos present at
any property now or previously owned or leased by any Borrower or any Subsidiary
that, singly or in the aggregate, have, or may reasonably be expected to have, a
materially  adverse  effect  on the  financial  condition,  operations,  assets,
business, properties or prospects of any Borrower Subsidiaries.

       (g)  After  due  inquiry,  to the best of the  Borrowers'  knowledge,  no
conditions  exist at, on or under any property now or previously owned or leased
by any Borrower or any  Subsidiary  which could  reasonably  be expected to give
rise to any material liability under any Environmental Law.

       Section  5.11.  Reliance.  No  written  information,  exhibit  or  report
furnished  by or on  behalf  of any  Borrower  to the  Agent  or any  Lender  in
connection with this Agreement,  the Notes or the Collateral  Documents contains
any material  misstatement  of fact or, when taken as a whole,  omits to state a
material fact or any fact necessary to make the statements contained therein not
misleading.

       Section  5.12.  Year 2000  Compliance.  Each  Borrower  has  conducted  a
comprehensive  review  and  assessment  of the  computer  applications  of  such
Borrower and its Subsidiaries and has made inquiry of their material  suppliers,
service vendors  (including data processors) and customers,  with respect to any
defect in computer  software,  data bases,  hardware,  controls and  peripherals
related  to the  occurrence  of the year 2000 or the use at any time of any date
which is before, on and after December 31, 1999, in connection therewith.  Based
on the foregoing review,  assessment and inquiry, each Borrower believes that no
such defect could  reasonably be expected to have a material  adverse  effect on
the business or financial  affairs of such Borrower (or of the Borrowers and the
Subsidiaries taken on a consolidated basis).

SECTION 6. CONDITIONS PRECEDENT.

       Section 6.1. All Advances. The obligation of the Lenders to make any Loan
under the Revolving Credit (including the first such  accommodation)  shall also
be subject to the conditions precedent that as of the time of the making of each
Loan under the Revolving Credit:

              (a) each of the representations and warranties set forth herein or
       in the  Collateral  Documents  shall be and remain true and correct as of
       said time in all material respects,  except that the  representations and
       warranties  made in Section  5.5  hereof  shall be deemed to refer to the
       most recent audited and unaudited financial  statements  delivered to the
       Lenders pursuant to Section 7.5 hereof; and

              (b) the Borrowers and the Subsidiaries shall be in compliance with
       all of the terms and conditions  hereof and of the Collateral  Documents,
       and no Default or Event of Default shall have occurred and be continuing.

                                      -14-
<PAGE>

Any request made by a Borrower to the Agent for a Loan hereunder shall be deemed
to constitute a  representation  and warranty that the foregoing  statements are
true and correct.

       Section 6.2. Initial Advance. At or prior to the time of the initial Loan
under the Revolving Credit, the following  conditions  precedent shall also have
been satisfied:

              (a) the Agent shall have received the following for the account of
       the Lenders  (each to be properly  executed and  completed)  and the same
       shall have been approved as to form and substance by the Lenders:

                     (i) the Notes;

                     (ii) copies  (executed or certified as may be  appropriate)
              for each Lender of all legal  documents  or  proceedings  taken in
              connection with the execution and delivery of this Agreement,  the
              Notes and the Collateral Documents;

                     (iii) the Peshtigo  Security  Agreement  and any  financing
              statements requested by the Agent in connection therewith;

                     (iv) date down endorsement to mortgagee's policies of title
              insurance (or binding  commitments  therefor) for those Collateral
              Documents  creating  liens on the real  property of  PlasTechs  in
              Oconto Falls,  Wisconsin  confirming  the liens thereon in amounts
              satisfactory  to the Lenders to be valid first liens subject to no
              defects  or  objections  which are  unacceptable  to the  Lenders,
              together  with  such  direct  access  reinsurance  agreements  and
              endorsements  (including  without  limitation  a revolving  credit
              endorsement and contiguity and zoning  endorsements)  as the Agent
              may require;

                     (v)  evidence  of  the  maintenance  of  insurance  by  the
              Borrowers as required hereby or by the Collateral Documents;

              (b) the liens of the  Collateral  Documents  shall  have been duly
       perfected in the manner required by law so as to be effective against all
       creditors of and purchasers from the relevant Borrower;

              (c) the Agent and the Lenders shall have received the initial fees
       called for hereby;

              (d)  the  Lenders  shall  have  received   such   valuations   and
       certifications  as they may require in order to satisfy  themselves as to
       the value of the Collateral, the financial condition of the Borrowers and
       the lack of material environmental or other contingent liabilities of the
       Borrowers;


                                      -15-
<PAGE>

              (e)  the  reimbursement  agreements  for  each  of the  Tax-exempt
       Financings  shall have been  amended  and  restated  pursuant  to written
       agreements in form and substance satisfactory to the Lenders; and

              (f) all legal matters  incident to the  transactions  contemplated
       hereby shall be  reasonably  acceptable  to the Lenders and their counsel
       and the Agent  shall have  received  for the  account of the  Lenders the
       favorable  written  opinion of  acceptable  counsel to the  Borrowers  in
       substantially the form attached hereto as Exhibit C.

SECTION 7. COVENANTS.

       Each  Borrower  agrees that,  so long as any credit is available to or in
use by or any amount is owing by any  Borrower  hereunder,  except to the extent
compliance in any case or cases is waived in writing by the Lenders:

       Section 7.1.  Maintenance  of Business  and  Compliance  with Laws.  Each
Borrower will preserve and keep in force and effect,  and cause each  Subsidiary
to  preserve  and keep in force and  effect,  its  corporate  existence  and all
material leases, licenses and permits necessary to the proper conduct of its and
their  respective  businesses.   Each  Borrower  shall,  and  shall  cause  each
Subsidiary to, comply with all laws,  orders,  regulations and ordinances of any
federal,  foreign,  state or local governmental  authority  (including,  without
limitation,   all  laws  regarding  public  health  or  welfare,   environmental
protection, water or air pollution, composition of products, underground storage
tanks,  toxic  substances  or  chemicals,  solid and special  wastes,  hazardous
wastes,  substances  materials  or  chemicals,  waste,  used,  or recycled  oil,
asbestos,  occupational health and safety, nuisances,  trespass and negligence),
except for such laws, orders,  regulations and ordinances the violation of which
would not, in the aggregate,  have a material  adverse effect on any Borrower or
such Subsidiary's financial condition,  results of operations or business or any
Borrower or such Subsidiary's ability to perform its obligations hereunder or in
connection  herewith.  The  Lenders  shall not assume or be deemed to assume any
responsibility,  liability or  obligations  with respect to compliance  with any
federal,  state, or local environmental law, rule,  regulation,  order,  permit,
license, ordinance,  judgment or decree; provided, however, that in the event of
the   imposition   or  assumption   for  any  reason   whatsoever  of  any  such
responsibility,   liability  or  obligation  (collectively,   an  "environmental
liability"),  each  Borrower  agrees to indemnify  and hold harmless the Lenders
from and against any and all claims, liabilities,  obligations, losses, damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind or nature whatsoever, including without limitation, attorneys' and experts'
fees, which may be imposed on, incurred by or asserted against any Lender in any
way relating to or arising from any such environmental liability.

       Section  7.2.  Maintenance  of Property.  Each  Borrower  will  maintain,
preserve and keep its plant,  properties  and  equipment in  reasonable  repair,
working  order and condition in all material  respects  (except for equipment or
other  property no longer  used or useful in the conduct of its  business or the
business  of the  Subsidiaries)  and will from time to time make all needful and
proper repairs,  renewals,  replacements,  additions and betterments  thereto so
that at all  times  the  overall  efficiency  thereof  shall  be  preserved  and
maintained and will cause each Subsidiary so to do in respect of its properties.


                                      -16-
<PAGE>


       Section 7.3. Taxes.  Each Borrower will duly pay and discharge,  and will
cause each Subsidiary to duly pay and discharge, all taxes, rates,  assessments,
fees and  governmental  charges upon or against such  Borrower or  Subsidiary or
against  their  respective  properties,  in each  case  before  the same  become
delinquent and before  penalties  accrue thereon,  unless and to the extent that
the same are being contested in good faith and by appropriate  proceedings which
prevent enforcement of the matter under contest.

       Section 7.4. Insurance.  Each Borrower will insure and keep insured,  and
will cause each Subsidiary to insure and keep insured, with good and responsible
insurance companies,  all insurable property owned by it which is of a character
usually insured by companies  similarly  situated and in amounts usually insured
by companies similarly situated and operating like properties; and each Borrower
will insure,  and cause each Subsidiary to insure,  such other hazards and risks
(including  employers'  and public and  product  liability  risks) with good and
responsible  insurance  companies  as and  to  the  extent  usually  insured  by
companies  similarly situated and conducting similar  businesses.  Each Borrower
will upon request of the Agent  furnish a  certificate  setting forth in summary
form the nature and extent of the insurance  maintained pursuant to this Section
7.4.

       Section 7.5.  Financial  Reports.  Each Borrower will maintain,  and will
cause each  Subsidiary to develop and maintain,  a standard and modern system of
accounting in accordance with sound accounting practice,  will permit the Agent,
each Lender and their  representatives  to visit and inspect the  properties and
assets of each Borrower and the  Subsidiaries  at all reasonable  times and will
furnish to the Agent, each Lender and their duly authorized representatives such
information respecting the business, financial condition, assets and liabilities
(whether  absolute or contingent) of any Borrower and the  Subsidiaries,  as the
Agent or any Lender may  reasonably  request;  and  without  any  request,  will
furnish to the Lenders:

              (a) as soon as  available,  and in any event  within 30 days after
       the  close of each  monthly  accounting  period  of each  fiscal  year of
       Badger,  copies of the  balance  sheet as of the close of such period and
       the  statement of earnings  and  statement of cash flow of Badger and the
       Subsidiaries  for such  period and such  fiscal year to the close of such
       period,  accompanied  by  reporting  schedules,  all  (i)  prepared  on a
       consolidated and  consolidating  basis and (ii) certified to on behalf of
       Badger by the Treasurer thereof;

              (b) as soon as  available,  and in any event  within 45 days after
       the close of each  quarterly  accounting  period of each  fiscal  year of
       Badger,  copies of the  balance  sheet as of the close of such period and
       the  statement of earnings  and  statement of cash flow of Badger and the
       Subsidiaries  for such  period and such  fiscal year to the close of such
       period,  accompanied  by  reporting  schedules,  all  (i)  prepared  on a
       consolidated   and   consolidating   basis  and  (ii)  setting  forth  in
       comparative form the consolidated and  consolidating  figures from actual
       results for the corresponding  quarterly and year-to-date  periods of the
       preceding  fiscal year and (iii)  certified to on behalf of Badger by the
       Treasurer thereof;

              (c) as soon as  available,  and in any event  within 90 days after
       the close of each  fiscal  year of  Badger,  copies  of the  consolidated
       balance  sheet of  Badger  and its 

                                      -17-
<PAGE>

       Subsidiaries  as of the close of such  fiscal  year and the  consolidated
       statements of income,  retained earnings and cash flows of Badger and its
       Subsidiaries  for such period,  and  accompanying  notes thereto,  all in
       reasonable  detail  showing  in  comparative  form  the  figures  for the
       previous  fiscal year,  accompanied by an unqualified  opinion thereon of
       Grant Thornton LLP or another firm of independent  public  accountants of
       recognized national standing,  selected by Badger and satisfactory to the
       Lenders,  to the effect that the financial  statements have been prepared
       in accordance with generally accepted accounting principles, consistently
       applied  and  present  fairly  in  accordance  with  generally   accepted
       accounting  principles,  consistently applied the consolidated  financial
       condition of Badger and its  Subsidiaries  as of the close of such fiscal
       year and the  results of their  operations  and cash flows for the fiscal
       year then ended and that an  examination  of such  accounts in connection
       with such financial statements has been made in accordance with generally
       accepted auditing standards and,  accordingly,  such examination included
       such tests of the accounting  records and such other auditing  procedures
       as were considered necessary in the circumstances; and

              (d)  promptly  after  knowledge  thereof  shall  have  come to the
       attention of any responsible  officer of any Borrower,  written notice of
       any threatened or pending  litigation,  governmental  proceeding or labor
       dispute  against any Borrower or any  Subsidiary  which could  materially
       adversely  affect the  business  and  properties  of any  Borrower or any
       Subsidiary and of the  occurrence of any Default or Event of Default,  of
       any default in the payment of rent due under any lease  necessary  to the
       proper  conduct of the business of any Borrower or any  Subsidiary or any
       action to terminate any such lease or of the receipt of any notice of any
       alleged  breach of the terms of any such  lease,  of the  receipt  of any
       notice of any  alleged  breach of the terms  of, or  default  under,  any
       indenture,  loan,  credit  agreement,  note,  mortgage,  deed of trust or
       similar  agreement  and of any notice of alleged  material  noncompliance
       with any  laws or  regulations  of the type  described  in  Section  5.11
       hereof.

Each monthly,  quarterly and annual report required by Section 7.5(a),  (b), and
(c),  respectively,  shall be  accompanied by a certificate in the form attached
hereto as  Exhibit D signed on behalf of Badger by its  Chairman,  President  or
Chief  Financial  Officer  setting forth  compliance  in reasonable  detail with
Sections  7.6,  7.7, 7.8 and 7.12 hereof and stating that no Default or Event of
Default exists hereunder as of the date of such certificate,  or if such Default
or Event of Default  exists the nature  thereof shall be  specified.  Each audit
report called for by Section  7.5(c) hereof shall be  accompanied by a statement
of the  accountants  certifying such statements to the effect that in the course
of their  audit  (conducted  in  accordance  with  generally  accepted  auditing
standards)  they have  obtained no knowledge  that a Default or Event of Default
has occurred hereunder or, if they have obtained any such knowledge,  describing
the same.

       Section 7.6.  Fixed Charge  Coverage  Ratio.  Badger shall not, as of the
last day of each  fiscal  month of  Badger  ending  during  each of the  periods
specified below,  permit the ratio of (x) EBITDA for the twelve fiscal months of
Badger then ended  minus  Capital  Expenditures  during such period to (y) Fixed
Charges for the same twelve fiscal months then ended to be less than:



                                      -18-
<PAGE>


                                                               FIXED CHARGE
                                                           COVERAGE RATIO SHALL
FROM AND INCLUDING            TO AND INCLUDING               NOT BE LESS THAN:

  The date hereof               June 29, 2000                  1.15 to 1.00

   June 30, 2000                June 29, 2001                  1.50 to 1.00

   June 30, 2001           At all times thereafter             2.00 to 1.00

       Section 7.7. Consolidated Tangible Net Worth. Badger will, as of the last
day of each fiscal month of Badger,  maintain Consolidated Tangible Net Worth at
not less than the Minimum Required Amount. For purposes of this Section 7.7, the
term  "Minimum  Required  Amount"  shall mean,  as of any time,  the sum of: (i)
$16,084,958; plus (ii) seventy five percent (75%) of Consolidated Net Income for
each  fiscal  quarter of Badger  (if  Consolidated  Net  Income for such  fiscal
quarter is positive) completed on or after March 31, 1999.

       Section 7.8. Leverage Ratio.  Badger will not, as of the last day of each
fiscal month of Badger ending  during the periods  specified  below,  permit the
Leverage Ratio to be more than:

                                                             LEVERAGE RATIO
FROM AND INCLUDING            TO AND INCLUDING           SHALL NOT BE MORE THAN:

  The date hereof              March 30, 1999                 4.00 to 1.00

  March 31, 1999              December 30, 1999               3.50 to 1.00

 December 31, 1999         At all times thereafter            2.75 to 1.00

       Section 7.9. Year 2000  Assessment.  Each Borrower shall take all actions
necessary and commit adequate  resources to assure that its  computer-based  and
other systems (and those of all  Subsidiaries)  are able to effectively  process
dates,   including  dates  before,  on  and  after  January  1,  2000,   without
experiencing any Year 2000 Problem that could cause a material adverse effect on
the business or financial  affairs of such Borrower (or of the Borrowers and the
Subsidiaries  taken on a consolidated  basis). At the request of the Agent, each
Borrower  will provide the Agent with  written  assurances  and  substantiations
(including,  but not limited  to, the  results of  internal  or  external  audit
reports  prepared in the ordinary course of business)  reasonably  acceptable to
the Agent as to the capability of such Borrower and its  Subsidiaries to conduct
its and their  businesses and operations  before,  on and after January 1, 2000,
without  experiencing a Year 2000 Problem  causing a material  adverse effect on
the business or financial  affairs of such Borrower (or of the Borrowers and the
Subsidiaries taken on a consolidated basis).

       Section 7.10.  Liens. No Borrower will, nor will it permit any Subsidiary
to,  pledge,  mortgage or  otherwise  encumber or subject to, or permit to exist
upon or be subjected to, any lien,  security interest or charge upon, any assets
or property of any kind or character  at any time

                                      -19-
<PAGE>

owned by such  Borrower  or any  Subsidiary;  provided,  however,  that  nothing
contained in this Section shall operate to prevent:

              (a) liens,  pledges  or  deposits  in  connection  with  workmen's
       compensation, social security obligations, taxes, assessments,  statutory
       obligations or other similar  charges,  good faith deposits in connection
       with tenders,  contracts or leases to which a Borrower or a Subsidiary is
       a party or other deposits  required to be made in the ordinary  course of
       business and not in connection with borrowing money or obtaining advances
       or credit;  provided in each case that the obligation or liability arises
       in the ordinary course of business and is not overdue,  or if overdue, is
       being contested in good faith by appropriate proceedings;

              (b) construction, materialmen's, carrier's or warehousemen's liens
       securing obligations not overdue, or if overdue,  being contested in good
       faith by appropriate proceedings;

              (c)  pledges or  deposits  for the  purpose of  securing a stay or
       discharge  in the  course  of any  legal  proceeding,  provided  that the
       aggregate  amount of liabilities of the Borrowers and the Subsidiaries so
       secured  by a pledge of  assets  permitted  under  this  subsection  (c),
       including interest and penalties thereon,  if any, shall not be in excess
       of $100,000 at any one time outstanding;

              (d) the liens provided for in the Collateral Documents;

              (e) with  respect  to real  property,  easements,  rights  of way,
       reservations and other minor defects or  irregularities in title which do
       not  materially  impair the use thereof for the  purposes for which it is
       held by such Borrower or any Subsidiary; and

              (f) the Liens  existing  on the date  hereof  supporting  the UDAG
       Loan.

       Section  7.11.  Indebtedness.  Badger  will not,  and will not permit any
Subsidiary to, issue, incur, assume, create or have outstanding any indebtedness
for borrowed  money  (including  as such for all purposes of this  Agreement any
indebtedness  representing  the deferred  purchase  price of property  (accounts
payable for the purchase of goods on ordinary  trade terms not  evidenced by any
instrument shall not be deemed  indebtedness for the deferred  purchase price of
property  for  purposes  of this  Section  7.11),  any  liability  in respect of
banker's acceptances, any indebtedness, whether or not assumed, secured by liens
on  property  acquired by Badger or any  Subsidiary  existing at the time of the
acquisition  thereof,  and the liability of Badger or any  Subsidiary  under any
lease which can be capitalized under generally accepted accounting principles as
in effect on the date hereof); provided,  however, that the foregoing provisions
shall not restrict nor operate to prevent:

              (a) the indebtedness of the Borrowers on the Notes;

              (b) the indebtedness of a Consolidated Subsidiary owing to Badger;

                                      -20-
<PAGE>

              (c)  indebtedness  of Badger  owing to a  Consolidated  Subsidiary
       arising in the  ordinary  course out of the  Borrowers'  cash  management
       system;

              (d) the currently  outstanding  obligations  under the  Tax-exempt
       Financings and the UDAG Loan; and

              (e) to the extent permitted by Section 7.12 hereof, purchase money
       indebtedness   of  the  Borrowers  for  the  purchase  price  of  capital
       equipment.

       Section 7.12. Capital  Expenditures.  Badger will not, nor will it permit
any Subsidiary  to, expend or become  obligated for Capital  Expenditures  in an
aggregate amount for Badger and the Subsidiaries in excess of the following:

          Fiscal Year 1998..................................$2,800,000
          Fiscal Year 1999..................................$3,700,000
          Fiscal Year 2000..................................$6,000,000
          Fiscal Year 2001..................................$4,800,000
          and each fiscal year thereafter

       Section 7.13. Acquisitions,  Investments, Loans, Advances and Guaranties.
The  Borrowers  will not,  and will not permit any  Subsidiary  to,  directly or
indirectly,  make,  retain or have outstanding any investments  (whether through
purchase of stock or  obligations or otherwise) in, or loans or advances to, any
other person,  firm or corporation or acquire all or any substantial part of the
assets or business of any other  person,  firm or  corporation,  or be or become
liable as endorser,  guarantor,  surety or otherwise for any debt, obligation or
undertaking  of any other  person,  firm or  corporation  or otherwise  agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest  therein or  otherwise  assure a creditor of another  against  loss or
apply for or become liable to the issuer of a letter of credit which supports an
obligation  of  another  or  subordinate  any claim or demand it may have to the
claim or demand of any other person,  firm or  corporation;  provided,  however,
that the foregoing provisions shall not apply to nor operate to prevent:

              (a) investments by a Borrower in Marketable Securities;

              (b)  endorsements  for  collection or deposit of commercial  paper
       received in the ordinary course of business; and

              (c) the existing equity  investments of Badger in PlasTechs and of
       Badger and PlasTechs in Peshtigo Power.

       Section 7.14.  Dividends and Certain Other  Restricted  Payments.  Badger
will not,  without the prior written consent of the Lenders,  declare or pay any
dividends  on or make any other  distributions  in  respect  of any class of its
capital stock (other than dividends  payable solely in its capital stock) and no
Borrower will directly or indirectly or through any Subsidiary purchase,  redeem
or otherwise acquire or retire any of its capital stock;  provided  however,  in
each case no Default or Event of  Default  shall then exist or result  therefrom
Badger may declare


                                      -21-
<PAGE>


and pay cash dividends on its common stock and may purchase its capital stock in
an aggregate  amount for all such dividends and purchases in each fiscal year of
Badger  not  exceeding  5% of  Badger's  Consolidated  Net  Income  for the most
recently completed fiscal year.

       Section  7.15.  Mergers,  Consolidations,  Leases and Sales.  Without the
prior  written  consent of the  Lenders,  the  Borrowers  will not, and will not
permit any  Subsidiary to, be a party to any merger or  consolidation,  or sell,
transfer,  lease or  otherwise  dispose  of all or any  substantial  part of its
property,  assets or business, or in any event sell or discount (with or without
recourse)  any of its  notes  or  accounts  receivable  or  lease  any  property
theretofore owned by a Borrower or any Subsidiary;  provided, however, that this
Section  shall not apply to nor prohibit (i) a Borrower or any  Subsidiary  from
selling  assets no longer  used or useful  in the  conduct  of their  respective
businesses or from selling  inventory in the ordinary  course of its business or
(ii) any merger or consolidation of a Subsidiary with or into Badger (so long as
Badger  is the  surviving  entity)  so long as,  at the time of such  merger  or
consolidation or immediately after giving effect thereto, no Default or Event of
Default shall occur or be  continuing.  A sale or disposition of 1% of the total
assets of a Borrower shall be deemed substantial for the foregoing purposes.

       Section 7.16. Environmental Laws. Each Borrower will, and will cause each
of its Subsidiaries to, (a) use and operate all of its facilities and properties
in material  compliance with all Environmental Laws, keep all necessary permits,
approvals,   certificates,   licenses  and  other  authorizations   relating  to
environmental matters in effect and remain in material compliance therewith, and
handle all  hazardous  substances  in material  compliance  with all  applicable
Environmental  Laws,  except  to the  extent  the  failure  to  comply  with the
foregoing  would not  materially  adversely  affect  the  business,  properties,
assets,  operations,  prospects or condition  (financial or otherwise) of Badger
and its  Subsidiaries  taken as a whole and (b)  provide  such  information  and
certifications  which any Lender  may  reasonably  request  from time to time to
evidence compliance with this Section.

       Section  7.17.  Disclosure  of  Environmental  Matters.  (a) As  soon  as
available,  and in any event  within 45 days  after the close of each  quarterly
fiscal period of Badger, Badger shall prepare and deliver a disclosure letter to
the Lenders  identifying  and  describing  in  reasonable  detail those  matters
necessary to preserve the accuracy and completeness of the  representations  set
forth in Section 5.10 herein.

       (b) As soon as reasonably practicable, but in no event later than fifteen
(15) days after any Borrower first receives or gives notice, such Borrower shall
disclose to the Lenders the  following to the extent the  existence or effect of
any of the  following  could have a  material  adverse  affect on the  business,
properties, assets, operations,  prospects or condition (financial or otherwise)
of any Borrower or any Subsidiary:

              (i)  any  Demand  or  knowledge  of  a  condition  which  in  such
       Borrower's  judgment  could  reasonably  be  expected to give rise to any
       material  liability under any  Environmental  Laws to any Borrower or any
       Subsidiary;

                                      -22-
<PAGE>

              (ii) any  previously  undisclosed  contamination  or  release of a
       hazardous  substance or hazardous  substances to groundwater or any water
       beneath  the  surface of the ground on  property  of any  Borrower or any
       Subsidiary;

              (iii) any Demand  that any  Borrower or any  Subsidiary  pay or is
       liable for any injury or damage to persons or property  due to or arising
       from any  Borrower's  or any  Subsidiary's  use or release  of  hazardous
       substance or hazardous substances.

              (iv) any Demand  that any  Borrower  or any  Subsidiary  pay or is
       liable for the costs of responding  to a release of hazardous  substances
       on property not owned or operated by any Borrower or any Subsidiary

       Section 7.18.  Maintenance of Subsidiaries.  Badger will not assign, sell
or transfer,  or permit any Subsidiary to issue,  assign, sell or transfer,  any
shares of capital stock of a Subsidiary,  provided that the foregoing  shall not
operate to prevent the  issuance,  sale and transfer to any person of any shares
of capital stock of a Subsidiary  solely for the purpose of  qualifying,  and to
the extent  legally  necessary  to  qualify,  such  person as a director of such
Subsidiary.

       Section 7.19.  Formation of Subsidiaries.  No Borrower nor any Subsidiary
shall  form or  acquire  any  Subsidiary  other  than the  present  Subsidiaries
designated on Exhibit B hereto.

       Section  7.20.  ERISA.  Each  Borrower  will,  and will  cause each ERISA
Affiliate to, promptly pay and discharge all obligations and liabilities arising
under  the IRC or ERISA of a  character  which if unpaid  or  unperformed  would
result in the imposition of a lien against any of their respective properties or
assets or a material obligation to pay money (including,  but not limited to any
liability to a "multiemployer  plan" as defined in Section 4001(a)(3) of ERISA),
will  promptly  notify  the  Lenders  when  any  Borrower  becomes  aware of the
occurrence of any  Reportable  Event (as defined in Section 4043 of ERISA) which
could  result  in the  termination  by the  PBGC of any  employee  benefit  plan
covering any officers or employees of any Borrower or any ERISA  Affiliate,  any
benefits of which are, or are required to be,  guaranteed by the PBGC (a "Plan")
or of receipt of any notice from the PBGC of its  intention to seek  termination
of any such Plan or appointment of a trustee  therefor.  Each Borrower will, and
will cause  each  ERISA  Affiliate  to,  notify the  Lenders of its or any ERISA
Affiliate's  intention to  terminate  any Plan and will not, and will not permit
any ERISA  Affiliate to,  terminate any such Plan, the termination of which will
result in a material liability to a Borrower or any ERISA Affiliate,  unless the
Borrowers and ERISA  Affiliates shall be in compliance with all of the terms and
conditions of this Agreement  after giving effect to any estimated  liability to
the PBGC (as determined by the Plan's independent actuaries) resulting from such
termination or withdrawal.

       Section  7.21.  Change in Fiscal Year.  Badger will not change its fiscal
year.

       Section 7.22.  Change in the Nature of Business.  The Borrowers will not,
and will not permit any  Subsidiary to, engage in any business or activity if as
a result the general  nature of the business of such Borrower or any  Subsidiary
would be changed in any material respect from the general nature of the business
engaged in by such Borrower or such Subsidiary on the date of this Agreement.


                                      -23-
<PAGE>

       Section 7.23.  Use of Loan  Proceeds.  The Borrowers  will use all credit
under this Agreement solely to finance general corporate purposes.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES.

       Section 8.1. Any one or more of the following  shall  constitute an Event
of Default hereunder:

              (a)  default in the  payment of any part of the  principal  of any
       Note when due,  whether  at the stated  maturity  thereof or at any other
       time provided for in this Agreement;

              (b) default in the payment of any part of the interest on any Note
       when due,  whether at the stated maturity thereof or at any time provided
       for in this  Agreement,  or default in the  payment  when due of any fee,
       commission, charge or other amount payable by any Borrower hereunder;

              (c) default in the  observance or  performance of any covenant set
       forth in  Sections  7.6  through  7.23  hereof or of any  covenant in any
       Collateral  Document  dealing with the use,  disposition or remittance of
       the proceeds of Collateral  or the  maintenance  of insurance  thereon or
       default after notice to the Borrowers in the observance or performance of
       any covenant set forth in Section 7.5 hereof;

              (d)  default  in  the  observance  or  performance  of  any  other
       provision  hereof  or of any of the  Collateral  Documents  which  is not
       remedied  within 20 days after  notice  thereof to the  Borrowers  by the
       Agent or any Lender;

              (e) default  shall occur in the payment  when due  (subject to any
       applicable   grace  period)  of  any   indebtedness  for  money  borrowed
       (including  as such all  indebtedness  so treated for purposes of Section
       7.11  hereof)  aggregating  greater  than  $100,000  which was  incurred,
       assumed or guaranteed by a Borrower or any Subsidiary,  or default or the
       happening  of any event  shall occur under any  indenture,  agreement  or
       other instrument under which any such indebtedness was incurred,  assumed
       or guaranteed if the effect of such default or event is to accelerate, or
       permit the  acceleration  of, the maturity of such  indebtedness and such
       default continues uncured,  unremedied and unwaived beyond any applicable
       period of grace;

              (f) any  representation  or warranty  made herein or in any of the
       Collateral  Documents or pursuant hereto or thereto or in connection with
       any  transaction  contemplated  hereby or  thereby  proves  untrue in any
       material respect as of the date of or making thereof;

              (g) any  judgment  or  judgments,  writ or  writs  or  warrant  or
       warrants  of  attachment,  or any  similar  process  or  processes  in an
       aggregate  amount in excess of $100,000 and which is not fully covered by
       insurance  shall  be  entered  or  filed  against  any  Borrower  or  any
       Subsidiary or against any of the property or assets of either and remains
       undischarged, unvacated, unbonded or unstayed for a period of 30 days;

                                      -24-
<PAGE>

              (h) Badger shall at any time and for any reason cease to own, both
       legally and beneficially, 100% of the issued and outstanding Voting Stock
       of PlasTechs;

              (i) an event occurs or  condition  exists which is specified as an
       event of default in any of the Collateral Documents;

              (j) any party obligated on any guarantee of any Obligations  shall
       purport to disavow, revoke, repudiate or terminate such guarantee;

              (k)  bankruptcy,   reorganization,   arrangement,   insolvency  or
       liquidation  proceedings  or  other  proceedings  for  relief  under  any
       bankruptcy  law or similar law for the relief of debtors  are  instituted
       against any Borrower or any  Subsidiary  and are not dismissed  within 60
       days  after  such  institution  or a decree  or  order of a court  having
       jurisdiction in the premises for the appointment of a trustee,  custodian
       or receiver for any Borrower or any  Subsidiary  or for the major part of
       its property is entered and the trustee,  custodian or receiver appointed
       pursuant to such decree or order is not  discharged  within 60 days after
       such appointment; or

              (l) any Borrower or any  Subsidiary  shall  institute  bankruptcy,
       reorganization,  arrangement,  insolvency or  liquidation  proceedings or
       other  proceedings  for relief under any  bankruptcy  law or laws for the
       relief of debtors or shall consent to the institution of such proceedings
       against it by others or to the entry of any decree or order  adjudging it
       bankrupt  or  insolvent  or  approving  as  filed  any  petition  seeking
       reorganization  under any bankruptcy or similar law or shall apply for or
       shall consent to the appointment of a receiver,  custodian or trustee for
       it or for the major part of its property or shall make an assignment  for
       the benefit of creditors or shall take any corporate  action  authorizing
       any of the foregoing.

       Section 8.2. When any Event of Default described in subsections 8.1(a) to
8.1(j),  both inclusive,  has occurred and is continuing,  the Agent shall, upon
request  of the  Lenders,  by  notice to the  Borrowers,  take any or all of the
following actions:

              (a) terminate the  obligation of the Lenders to extend any further
       credit  hereunder on the date (which may be the date  thereof)  stated in
       such notice; and

              (b) declare the principal of and the accrued interest on the Notes
       to be forthwith due and payable and thereupon the Notes,  including  both
       principal  and interest,  and all fees,  charges,  commissions  and other
       Obligations  payable  hereunder,  shall be and become immediately due and
       payable  without further  demand,  presentment,  protest or notice of any
       kind.

       Section 8.3. When any Event of Default  described in subsection 8.1(k) or
8.1(l) has  occurred  and is  continuing,  then the then  unpaid  balance of the
Notes, including both principal and interest, and all fees, charges, commissions
and other  Obligations  payable  hereunder,  shall  immediately  become  due and
payable  without  presentment,  demand,  protest or notice of any 

                                      -25-
<PAGE>



kind, and the obligation of the Lenders to extend further credit pursuant to any
of the terms hereof shall immediately terminate.

SECTION 9. THE GUARANTEES.

       Section 9.1. The Guarantees. To induce the Lenders to provide the credits
described  herein and in  consideration  of benefits  expected to accrue to each
Borrower  by  reason  of  the  Commitments  and  for  other  good  and  valuable
consideration,  receipt of which is hereby  acknowledged,  each Borrower  hereby
unconditionally and irrevocably guarantees jointly and severally to the Lenders,
to the Agent,  and to each of them, the due and punctual  payment of all present
and future indebtedness of the Borrowers evidenced by or arising out of the Loan
Documents,  including,  but not  limited  to,  the due and  punctual  payment of
principal of and  interest on the Notes and the due and punctual  payment of all
other  Obligations  now or  hereafter  owed  by the  Borrowers  under  the  Loan
Documents as and when the same shall  become due and payable,  whether at stated
maturity,  by  acceleration  or  otherwise,  according  to the terms  hereof and
thereof.  In case of failure by any Borrower  punctually to pay any indebtedness
guaranteed  hereby,  each Borrower  hereby  unconditionally  agrees  jointly and
severally to make such payment or to cause such payment to be made punctually as
and when the same shall become due and payable,  whether at stated maturity,  by
acceleration or otherwise, and as if such payment were made by such Borrower.

       Section 9.2. Guarantee Unconditional. The obligations of each Borrower as
a  guarantor  under this  Section 9 shall be  unconditional  and  absolute  and,
without  limiting  the  generality  of the  foregoing,  shall  not be  released,
discharged or otherwise affected by:

              (a) any  extension,  renewal,  settlement,  compromise,  waiver or
       release in respect of any  obligation  of any other  Borrower  under this
       Agreement or any other Loan Document or by operation of law or otherwise;

              (b)  any  modification  or  amendment  of or  supplement  to  this
       Agreement or any other Loan Document;

              (c) any change in the corporate existence,  structure or ownership
       of,  or any  insolvency,  bankruptcy,  reorganization  or  other  similar
       proceeding  affecting,  any other  Borrower,  or any of their  respective
       assets,  or any resulting  release or discharge of any  obligation of any
       other Borrower contained in any Loan Document;

              (d) the existence of any claim, set-off or other rights which such
       Borrower may have at any time against the Agent,  any Lender or any other
       Person, whether or not arising in connection herewith;

              (e) any  failure  to  assert,  or any  assertion  of, any claim or
       demand or any exercise of, or failure to exercise, any rights or remedies
       against any other Borrower, or any Collateral;



                                      -26-
<PAGE>



              (f) any  application  of any sums by whomsoever  paid or howsoever
       realized to any  obligation  of any other  Borrower,  regardless  of what
       obligations of such Borrower remain unpaid;

              (g) any invalidity or unenforceability  relating to or against any
       other  Borrower  for any  reason of this  Agreement  or of any other Loan
       Document or any provision of applicable  law or regulation  purporting to
       prohibit  the  payment  by any  other  Borrower  of the  principal  of or
       interest  on any Note or any other  amount  payable  by it under the Loan
       Documents; or

              (h) any other act or  omission  to act or delay of any kind by the
       Agent,  any  Lender  or  any  other  Person  or  any  other  circumstance
       whatsoever  that  might,  but  for  the  provisions  of  this  paragraph,
       constitute a legal or equitable discharge of the obligations of any other
       Borrower under this Section 9.

       Section  9.3.  Discharge  Only Upon  Payment  in Full;  Reinstatement  in
Certain  Circumstances.  Each Borrower's  obligations under this Section 9 shall
remain in full force and effect until the  Commitments  are  terminated  and the
principal  of and  interest  on the Notes and all other  amounts  payable by the
Borrowers under this Agreement and all other Loan Documents shall have been paid
in full.  If at any time any payment of the principal of or interest on any Note
or any  other  amount  payable  by the  Borrowers  under the Loan  Documents  is
rescinded  or must be  otherwise  restored  or  returned  upon  the  insolvency,
bankruptcy or  reorganization  of any Borrower,  or otherwise,  each  Borrower's
obligations  under  this  Section  9 with  respect  to  such  payment  shall  be
reinstated  at such time as though such  payment had become due but had not been
made at such time and shall survive the  termination of the  Commitments and the
repayment of the Loans.

       Section 9.4.  Subrogation.  No Borrower will exercise any rights which it
may acquire by way of subrogation by any payment made  hereunder,  or otherwise,
until  all the  Obligations  shall  have  been  paid in full  subsequent  to the
termination of all the Commitments. If any amount shall be paid to a Borrower on
account  of such  subrogation  rights at any time  prior to the later of (x) the
payment  in full  of the  Obligations  and all  other  amounts  payable  by such
Borrower  hereunder and (y) the termination of all the Commitments,  such amount
shall be held in trust for the  benefit of the Agent and the  Lenders  and shall
forthwith be paid to the Agent or be credited and applied upon the  Obligations,
whether  matured or unmatured,  in accordance  with the terms of this Agreement.
Notwithstanding  any other provision hereof,  the Agent's and the Lenders' right
to recovery  against each  Borrower  under this Section 9 shall not exceed $1.00
less than the amount which would render such Borrower's  obligations  under this
Section 9 void or voidable under applicable law,  including  without  limitation
fraudulent conveyance law.

       Section 9.5. Waivers. Each Borrower irrevocably waives acceptance hereof,
presentment,  demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by the Agent, any Lender or
any other Person against any Borrower or any other Person.

                                      -27-
<PAGE>



       Section  9.6.  Stay of  Acceleration.  If  acceleration  of the  time for
payment of any amount  payable by any Borrower under this Agreement or any other
Loan Document is stayed upon the  insolvency,  bankruptcy or  reorganization  of
such Borrower,  all such amounts  otherwise  subject to  acceleration  under the
terms of this Agreement or the other Loan Documents shall nonetheless be payable
jointly and  severally  by the  Borrowers  hereunder  forthwith on demand by the
Agent made at the request of the Lenders.

SECTION 10. DEFINITIONS.

       The following  terms when used herein shall have the following  meanings;
such terms to be equally applicable to both the singular and plural of the terms
defined  (capitalized  terms  defined  elsewhere  in this  Agreement to have the
meanings so ascribed to them in all provisions of this Agreement).

       "Adjusted LIBOR Rate" means a rate per annum  determined  pursuant to the
following formula:

                  Adjusted LIBOR Rate =         LIBOR              
                                        100%-Reserve Percentage

"Reserve  Percentage"  means,  for the purpose of computing  the Adjusted  LIBOR
Rate,  the  maximum  rate  of  all  reserve  requirements  (including,   without
limitation,  any marginal  emergency,  supplemental  or other special  reserves)
imposed  by the  Board  of  Governors  of the  Federal  Reserve  System  (or any
successor)  under  Regulation  D on  Eurocurrency  liabilities  (as such term is
defined in Regulation D) for the applicable  Interest Period as of the first day
of  such  Interest  Period,  but  subject  to any  amendments  to  such  reserve
requirement  by such  Board  or its  successor,  and  taking  into  account  any
transitional adjustments thereto becoming effective during such Interest Period.
For  purposes  of  this  definition,  LIBOR  Portions  shall  be  deemed  to  be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for  prorations,  exemptions or offsets under  Regulation D. "LIBOR" means,  for
each Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such
rate is  available,  and (b) if the LIBOR Index Rate cannot be  determined,  the
arithmetic  average  of the rate of  interest  per annum  (rounded  upwards,  if
necessary,  to  nearest  1/100  of 1%) at  which  deposits  in U.S.  dollars  in
immediately  available  funds are  offered to the Agent at 11:00  a.m.  (London,
England time) two (2) Business Days before the beginning of such Interest Period
by major banks in the  interbank  eurodollar  market for a period  equal to such
Interest Period and in an amount equal or comparable to the principal  amount of
the Eurodollar Loan scheduled to be made by the Agent as part of such Borrowing.
Each  determination  of LIBOR  made by the Agent  shall be final and  conclusive
absent manifest error.

       "Affiliate"  means  any  person,  firm,  corporation  or  entity  (herein
collectively called a "Person") directly or indirectly controlling or controlled
by, or under direct or indirect common control with,  another  Person.  A Person
shall be deemed to control another Person for the purposes of this definition if
such first Person  possesses,  directly or indirectly,  the power to direct,  or
cause the  direction  of, the  management  and  policies  of the second  Person,
whether


                                      -28-
<PAGE>

through  the  ownership  of voting  securities,  common  directors,  trustees or
officers, by contract or otherwise.

       "Agent"  means Harris Trust and Savings  Bank and any  successor  thereto
appointed pursuant to Section 11.1 hereof.

       "Badger Security  Agreement" means that certain Security  Agreement dated
as of June 30, 1993 from Badger to the Agent.

       "Business  Day" means any day (other  than a Saturday or Sunday) on which
banks are generally  open for business in Chicago,  Illinois and, when used with
respect  to LIBOR  Portions,  a day on which  banks are also  dealing  in United
States Dollar deposits in London, England and Nassau, Bahamas.

       "Capital  Expenditures"  for any period  means  capital  expenditures  of
Badger and its  Subsidiaries  during such period as defined  and  classified  in
accordance with generally accepted accounting principles consistently applied.

       "Capital  Lease"  means any lease of property  which in  accordance  with
generally  accepted  accounting  principles is required to be capitalized on the
balance sheet of the lessee.

       "Collateral  Documents"  means all  guarantees as shall from time to time
guaranty the Notes  (including the  Guaranties) or any other  obligations of the
Borrowers hereunder or in connection herewith and all mortgages, deeds of trust,
security agreements,  pledge agreements,  assignments,  financing statements and
other  documents as shall from time to time secure or relate to the Notes or any
other Obligations.

       "Commitments"  means the  commitments  of the  Lenders to make  financial
accommodations  under the  Revolving  Credit in the amounts  set forth  opposite
their  signatures  hereto under the heading  "Commitment" as such amounts may be
reduced pursuant hereto.

       "Consolidated  Net Income" means,  with reference to any period,  the net
income (or net loss) of Badger and its Consolidated Subsidiaries for such period
as  computed on a  consolidated  basis in  accordance  with  generally  accepted
accounting principles, and, without limiting the foregoing, after deduction from
gross income of all expenses and reserves,  including  reserves for all taxes on
or  measured  by income,  but  excluding  any  extraordinary  profits and losses
incurred during Badger's fiscal years 1997 and 1998, also excluding any taxes on
such extraordinary  profits and any unrealized gains or losses on the Borrowers'
Marketable Securities.

       "Consolidated Subsidiary" means any subsidiary whose accounts at any date
are  consolidated  with those of Badger in accordance  with  generally  accepted
accounting principles.

       "Consolidated  Tangible  Net Worth" - means the  amount of capital  stock
accounts (less the amount of any treasury stock) plus (or minus in the case of a
deficit) the amount of surplus and retained  earnings accounts of Badger and its
Consolidated Subsidiaries and minus the total amount of all intangible assets of
Badger  and  its  Consolidated  Subsidiaries  (including,   without 


                                      -29-
<PAGE>

limitation,   unamortized  debt  discount  and  expense,  deferred  charges  and
goodwill),  all as  determined  on a  consolidated  basis  for  Badger  and  its
Consolidated  Subsidiaries  in accordance  with  generally  accepted  accounting
principles consistently applied;  provided,  however, that Consolidated Tangible
Net Worth shall not be increased or reduced by any unrealized gains or losses on
the Borrowers' Marketable Securities.

       "Domestic Rate" means a fluctuating  interest rate per annum equal at all
times to the greater of:

              (a) the rate of interest  announced by the Agent from time to time
       as its prime commercial rate as in effect on such day, with any change in
       such rate  resulting  from a change in said prime  commercial  rate to be
       effective as to the  Borrowers  as of the date of the relevant  change in
       said prime commercial rate; and

              (b) the sum of (x) the  rate  determined  by the  Agent  to be the
       average (rounded upwards, if necessary, to the next higher 1/100 of 1% of
       the rates per annum  quoted  to the  Agent at  approximately  10:00  a.m.
       Chicago time (or as soon  thereafter as is  practicable) on such day (or,
       if such day is not a Business Day, on the immediately  preceding Business
       Day) by two or more Federal funds  brokers  selected by the Agent for the
       sale to the Agent at face value of Federal funds in the secondary  market
       in an amount  equal or  comparable  to the  principal  amount owed to the
       Lenders for which such rate is being determined, plus (y) 1/2 of 1%.

       "EBITDA" means, with reference to any period, Consolidated Net Income for
such  period plus all amounts  deducted  in  arriving at such  Consolidated  Net
Income  amount in respect of (i)  Interest  Expense for such  period,  plus (ii)
federal,  state and local income  taxes for such period,  plus (iii) all amounts
properly charged for depreciation of fixed assets and amortization of intangible
assets during such period on the books of the Borrowers and their Subsidiaries.

       "ERISA"  means the Employee  Retirement  Income  Security Act of 1974, as
amended from time to time, and any successor statute.

       "ERISA Affiliate" means any (i) corporation which is a member of the same
controlled  group of  corporations  (within the meaning of Section 414(b) of the
IRC) as any Borrower,  (ii)  partnership or other trade or business  (whether or
not incorporated)  under common control (within the meaning of Section 414(c) of
the IRC) with any  Borrower,  and (iii)  member of the same  affiliated  service
group  (within the meaning of Section  414(m) of the IRC) as any  Borrower,  any
corporation  described  in  clause  (i)  above  or any  partnership  or trade or
business described in clause (ii) above.

       "Eurodollar Margin" means

              (i)  1.25%  for any  Pricing  Period  the  Compliance  Certificate
       delivered by Badger for the second  fiscal month  preceding  such Pricing
       Period shows a Leverage Ratio of less than 2.25 to 1.00;

                                      -30-
<PAGE>



              (ii)  1.50% for any  Pricing  Period  the  Compliance  Certificate
       delivered by Badger for the second  fiscal month  preceding  such Pricing
       Period  shows a Leverage  Ratio of greater  than or equal to 2.25 to 1.00
       and less than 2.75 to 1.00;

              (iii)  1.75% for any  Pricing  Period the  Compliance  Certificate
       delivered by Badger for the second  fiscal month  preceding  such Pricing
       Period shows a Leverage  Ratio  greater than or equal to 2.75 to 1.00 but
       less than 3.25 to 1.00; and

              (iv)  2.25% for any  Pricing  Period  the  Compliance  Certificate
       delivered by Badger for the second  fiscal month  preceding  such Pricing
       Period  shows a Leverage  Ratio  greater than or equal to 3.25 to 1.00 or
       for which Badger has not delivered a Compliance  Certificate  as required
       by Section 7.6 hereof.

From the Effective Date through March 31, 1999,  the Eurodollar  Margin shall be
that set forth in clause (iv) above.

       "Event of  Default"  means any event or  condition  specified  as such in
Section 8.1 hereof and  "Default"  means any event or  condition  which with the
lapse of time,  the  giving  of  notice  or both  would  constitute  an Event of
Default.

       "Fixed Charges" means,  with reference to any period,  the sum of (i) the
aggregate  amount of  payments  required to be made by the  Borrowers  and their
Subsidiaries  during such period in respect of principal on all Indebtedness for
Borrowed  Money  (whether at  maturity,  as a result of  mandatory  sinking fund
redemption, mandatory prepayment, acceleration or otherwise), plus (ii) Interest
Expense for such period, plus (iii) the aggregate amount of payments required to
be made by the Borrowers and their Subsidiaries during such period in respect of
leases or  similar  arrangements  (including  without  limitation  all  payments
required  under  operating  and Capital  Leases under which the Borrowers or any
Subsidiary  is liable as lessee);  provided,  however,  Fixed  Charges shall not
include any amounts  payable with  respect to the  Tax-Exempt  Financings  which
constitute payments in excess of the regularly scheduled amortization thereof.

       "IRC" means the Internal  Revenue  Code of 1986,  as amended from time to
time.

       "Indebtedness  for  Borrowed  Money"  means  for  the  Borrowers  and the
Subsidiaries  (i) all  indebtedness  of the Borrowers and the  Subsidiaries  for
borrowed  money,  whether current or funded,  or secured or unsecured,  (ii) all
indebtedness for the deferred purchase price of property or services (whether or
not represented by a note or other security),  (iii) all indebtedness created or
arising  under any  conditional  sale or other title  retention  agreement  with
respect to property  acquired by any Borrower or any Subsidiary (even though the
rights and remedies of the seller or Lender under such agreement in the event of
default  are  limited  to  repossession  or  sale of such  property),  (iv)  all
indebtedness secured by a purchase money mortgage or other lien to secure all or
part of the purchase price of property  subject to such mortgage or lien and (v)
all  obligations  under leases  which shall have been or must be, in  accordance
with generally  accepted  accounting  principles,  recorded as capital leases in
respect of which any Borrower or any Subsidiary is liable as lessee.


                                      -31-
<PAGE>


       "Interest  Expense"  means with  reference  to any  period  all  interest
charges  (including  imputed  interest on  capitalized  lease  obligations)  and
amortization of debt discount and expense with respect to all  Indebtedness  for
Borrowed Money of the Borrowers and the Subsidiaries during such period.

       "Interest  Period"  means with respect to any LIBOR  Portion,  the period
commencing on, as the case may be, the creation, continuation or conversion date
with  respect to such LIBOR  Portion  and ending one,  two,  three or six months
thereafter  as  selected  by the  relevant  Borrower  in its notice as  provided
herein;  provided  that,  all of the foregoing  provisions  relating to Interest
Periods are subject to the following:

              (i) if any Interest  Period would  otherwise end on a day which is
       not a Business Day,  that  Interest  Period shall be extended to the next
       succeeding  Business Day, unless the result of such extension would be to
       carry such  Interest  Period into another  calendar  month in which event
       such Interest Period shall end on the immediately preceding Business Day;

              (ii) no Interest Period may extend beyond the Termination Date;

              (iii) the interest  rate to be applicable to each Portion for each
       Interest  Period  shall  apply from and  including  the first day of such
       Interest Period to but excluding the last day thereof; and

              (iv) no Interest  Period may be selected  if after  giving  effect
       thereto the relevant  Borrower will be unable to make a principal payment
       scheduled to be made during such Interest Period without paying part of a
       LIBOR  Portion on a date other than the last day of the  Interest  Period
       applicable thereto.

       For purposes of  determining an Interest  Period,  a month means a period
starting  on  one  day  in  a  calendar   month  and  ending  on  a  numerically
corresponding day in the next calendar month, provided,  however, if an Interest
Period  begins  on the  last  day  of a  month  or if  there  is no  numerically
corresponding  day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.

       "Lenders"  means  Harris  Trust and  Savings  Bank and all other  lenders
becoming parties hereto pursuant to Section 12.18 hereto.

       "Letters of Credit" means, collectively, the letters of credit supporting
each of the Tax-exempt Financings.

       "Leverage  Ratio"  means,  as of any time,  the ratio of (x) Total Funded
Debt as of such date of determination to (y) EBITDA for the twelve most recently
completed fiscal months of Badger.

       "LIBOR Index Rate" means,  for any  Interest  Period,  the rate per annum
(rounded upwards, if necessary,  to the next higher one  hundred-thousandth of a
percentage  point)  for


                                      -32-
<PAGE>

deposits  in U.S.  Dollars for a period  equal to such  Interest  Period,  which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
day two Business Days before the commencement of such Interest Period.

       "Loan  Documents"  means  this  Agreement,   the  Notes,  the  Collateral
Documents and any other document or agreement executed in connection herewith or
therewith.

       "Marketable  Securities" - means (i) direct  general  obligations  of, or
obligations  the  payment  of  the  principal  of  and  interest  on  which  are
unconditionally  guaranteed  by,  the  United  States of  America,  (ii)  bonds,
debentures or notes issued by Federal National Mortgage Association,  Government
National Mortgage Association, Federal Financing Bank, Federal Farm Credit Bank,
Federal Land Bank, Federal Home Loan Bank, Farmers Home Administration,  Federal
Home Loan Mortgage  Association or any other comparable federal agency hereafter
created to the extent that said  obligations are  unconditionally  guaranteed by
the United States of America,  (iii) direct and general obligations of any state
of the United States of America or any municipality or political  subdivision of
such State if at the time of their purchase such obligations are rated in any of
the three highest  rating  categories  by Moody's  Investors  Service,  Inc. and
Standard & Poor's Corporation, (iv) corporate debt obligations if at the time of
their  purchase such  obligations  are rated in any of the three highest  rating
categories by Moody's Investors Service, Inc. and Standard & Poor's Corporation,
(v)  certificates of deposit issued by any bank or trust company the deposits of
which  are  secured  by the  Federal  Deposit  Insurance  Corporation,  if  such
certificates  of  deposit  are either (A) fully  insured  as to  principal  plus
accrued interest by the Federal Deposit Insurance Corporation,  or (B) issued by
a bank or trust company the long-term  unsecured  debt  obligations of which are
rated  in any of the  three  highest  rating  categories  by  Moody's  Investors
Service,  Inc. and Standard & Poor's Corporation,  and (vi) existing investments
as set forth on Exhibit E hereto.

       "Material adverse change" and "material adverse effect" means an event or
series of events taken as a whole,  which has  resulted in, or which  reasonably
could be  expected  to result in a  material  adverse  change in the  condition,
financial or otherwise, of Badger and its consolidated  Subsidiaries as shown on
the then most recent financial statements of Badger. For the purposes hereof, an
event  resulting  loss  reflected  in Badger's  earnings  in an amount  equal to
$500,000 would be deemed to be a material adverse change.

       "Notes" is defined in Section 1.2 hereof.

       "Obligations" means any and all indebtedness, obligations and liabilities
of the Borrowers and the Subsidiaries or any of them to the Lenders or the Agent
now or  hereafter  arising  hereunder  or  under  the  Notes  or the  Collateral
Documents or any other Loan Document.

       "Oconto Falls  Facility"  means the property of PlasTechs  located at 705
Ralph Lemorande Drive, in Oconto Falls, Wisconsin purchased with the proceeds of
the Oconto Falls Financing.

       "Oconto  Falls  Financing"  means the  $4,000,000  City of Oconto  Falls,
Wisconsin Variable Rate Demand Limited Obligation Industrial Development Revenue
Bonds, Series 1992 


                                      -33-
<PAGE>



(PlasTechs,  Inc.  Project)  maturing  December 1, 2006 supported by Irrevocable
Transferable  Letter of Credit No. SPL 32731  issued by Harris Trust and Savings
Bank in the amount of $2,751,485.

       "Person" means any person, firm, corporation or other entity.

       "Peshtigo  Facility"  means the  property  of Badger  located at 200 West
Front Street, in Peshtigo, Wisconsin purchased with the proceeds of the Peshtigo
Financing.

       "Peshtigo  Financing"  means the $4,650,000  City of Peshtigo,  Wisconsin
Variable Rate Demand Limited Obligation  Industrial  Development Revenue Funding
Bonds,  Series 1992 (Badger Paper Mills, Inc. Project) maturing December 1, 2006
supported by Irrevocable  Transferable  Letter of Credit No. SPL 32687 issued by
Harris Trust and Savings Bank in the amount of $4,738,669.

       "Peshtigo Power" means Peshtigo Power, LLC, a Wisconsin limited liability
company.

       "Peshtigo Security Agreement" means that certain Security Agreement dated
as of January 29, 1999 from Peshtigo Power to the Agent.

       "PlasTechs  Security  Agreement"  means that certain  Security  Agreement
dated as of June 30, 1993 from PlasTechs to the Agent.

       "Pricing  Period" means,  for  determining  the Eurodollar  Margin,  each
period  commencing  on the  first  day of each  fiscal  quarter  of  Badger  and
terminating on the last day of such fiscal quarter of Badger.

       "Reimbursement   Obligations"  means  any  and  all  obligations  of  the
Borrowers or either of them to reimburse the Bank for drawings under the Letters
of Credit.

       "Security Agreements" means collectively,  the Badger Security Agreement,
the PlasTechs Security Agreement and the Peshtigo Power Security Agreement.

       "Subsidiary"  means any other corporation at least 51% of the outstanding
voting  shares  of which  is at the time  directly  or  indirectly  owned by any
Borrower  or  by  any  other  corporations  or  entities  which  are  themselves
Subsidiaries.

       "Tax-exempt Financings" means the Oconto Falls Financing and the Peshtigo
Financing.

       "Telerate  Page 3750" means the display  designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British  Bankers'  Association  as
the  information   vendor  for  the  purpose  of  displaying   British  Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).

       "Termination  Date" means November 30, 2001 or such earlier date on which
the  Commitments  are  terminated in whole  pursuant to Sections 3.5, 8.2 or 8.3
hereof,  provided  that


                                      -34-
<PAGE>

the Borrower may, at least 60 days prior to such date,  request that the Lenders
extend such date to a later date at the Lenders' sole discretion.

       "Total Funded Debt" means, at any time the same is to be determined,  the
aggregate of all  Indebtedness  for Borrowed  Money of the  Borrowers  and their
Subsidiaries at such time, plus all Indebtedness for Borrowed Money of any other
Person which is directly or  indirectly  guaranteed  by the  Borrowers or any of
their  Subsidiaries  or which the  Borrowers  or any of their  Subsidiaries  has
agreed  (contingently  or  otherwise)  to  purchase or  otherwise  acquire or in
respect  of which  the  Borrowers  or any of their  Subsidiaries  has  otherwise
assured a creditor against loss.

       "UDAG Loan" means the  $2,000,000  in original  principal  amount City of
Peshtigo Loan issued pursuant to U.D.A.G.  Grant No.  B-83-AB-55-0064  to Badger
due August 31, 1999 of which $1,581,805.80 remains outstanding.

       "Voting  Stock"  means  capital  stock  or  any  class  or  classes  of a
corporation   the   holders  of  which  are   ordinarily,   in  the  absence  of
contingencies, entitled to elect a majority of the directors thereof (or Persons
performing similar functions).

       "Year 2000 Problem" means any  significant  risk that computer  hardware,
software,  or equipment containing embedded microchips essential to the business
or operations of the Borrowers or any of the Subsidiaries  will not, in the case
of dates or time periods occurring after December 31, 1999, function at least as
efficiently  and  reliably  as in the case of times  or time  periods  occurring
before January 1, 2000, including the making of accurate leap year calculations.

SECTION 11. THE AGENT.

       Section 11.1. Appointment and Authorization.  Each Lender hereby appoints
and  authorizes  the Agent to take such  action  as agent on its  behalf  and to
exercise  such  powers  hereunder  and under  the  Collateral  Documents  as are
designated  to the Agent by the terms  hereof  and  thereof  together  with such
powers as are reasonably incidental thereto. The Agent may resign at any time by
sending  twenty (20) days prior written  notice to the Borrowers and the Lenders
and may be removed by the Lenders upon twenty (20) days prior written  notice to
the Borrowers and the Lenders.  In the event of any such resignation or removal,
the  Lenders may  appoint a new agent,  which  shall  succeed to all the rights,
powers and duties of the Agent hereunder and under the Collateral Documents. Any
resigning  or  removed  Agent  shall  be  entitled  to the  benefit  of all  the
protective provisions hereof with respect to its acts as an agent hereunder, but
no successor  Agent shall in any event be liable or responsible  for any actions
of its  predecessor.  If the Agent  resigns or is removed  and no  successor  is
appointed,  the rights and  obligations  of such  Agent  shall be  automatically
assumed by the  Lenders  and (i) the  Borrowers  shall be  directed  to make all
payments due each Lender hereunder  directly to such Lender and (ii) the Agent's
rights in the Collateral  Documents  shall be assigned  without  representation,
recourse or warranty to the Lenders as their interests may appear.

       Section 11.2.  Rights as a Lender.  The Agent has and reserves all of the
rights,  powers and duties hereunder and under its Notes,  Collateral  Documents
and the other Loan Documents 


                                      -35-
<PAGE>



as any Lender may have and may exercise the same as though it were not the Agent
and the terms  "Lender" or "Lenders" as used herein and in all of such documents
shall,  unless the context otherwise expressly  indicates,  include the Agent in
its individual capacity as a Lender.

       Section 11.3.  Standard of Care. The Lenders  acknowledge  that they have
received  and  approved  copies  of the  Collateral  Documents  and  such  other
information and documents concerning the transactions  contemplated and financed
hereby as they have  requested  to receive  and/or  review.  The Agent  makes no
representations  or  warranties  of any kind or  character  to the Lenders  with
respect to the validity, enforceability,  genuineness,  perfection, value, worth
or collectibility  hereof or of the Notes, the Collateral Documents or the other
Loan  Documents or of the liens  provided for thereby or of any other  documents
called for hereby or thereby or of the Collateral. The Agent need not verify the
worth or  existence  of the  Collateral.  Neither  the Agent  nor any  director,
officer  employee,  agent or  representative  thereof  (including  any  security
trustee therefor) shall in any event be liable for any clerical errors or errors
in judgment,  inadvertence  or  oversight,  or for action taken or omitted to be
taken by it or them hereunder or under the Collateral Documents or in connection
herewith or therewith  except for its or their own gross  negligence  or willful
misconduct.  The Agent  shall  incur no  liability  under or in  respect of this
Agreement or the  Collateral  Documents by acting upon any notice,  certificate,
warranty, instruction or statement (oral or written) of anyone (including anyone
in good faith believed by it to be authorized to act on behalf of any Borrower),
unless it has actual  knowledge  of the  untruthfulness  of same.  The Agent may
execute  any of its  duties  hereunder  by or  through  employees,  agents,  and
attorneys-in-fact  and shall not be answerable to the Lenders for the default or
misconduct  of any such agents or  attorneys-in-fact  selected  with  reasonable
care.  The Agent shall be entitled to advice of counsel  concerning  all matters
pertaining to the agencies  hereby created and its duties  hereunder,  and shall
incur no liability to anyone and be fully protected in acting upon the advice of
such counsel.  The Agent shall be entitled to assume that no Default or Event of
Default exists unless  notified to the contrary by a Lender.  The Agent shall in
all events be fully  protected  in acting or  failing to act in accord  with the
instructions  of the  Lenders.  Upon  the  occurrence  of an  Event  of  Default
hereunder,  the Agent shall take such action with respect to the  enforcement of
its liens on the Collateral and the  preservation  and protection  thereof as it
shall be directed  to take by the Lenders but unless and until the Lenders  have
given such direction the Agent shall take or refrain from taking such actions as
it deems appropriate and in the best of interest of all Lenders. The Agent shall
in all cases be fully  justified in failing or refusing to act hereunder  unless
it shall be indemnified to its reasonable  satisfaction  by the Lenders  against
any and all  liability  and  expense  which may be  incurred  by it by reason of
taking or continuing  to take any such action.  The Agent may treat the owner of
any Note as the holder  thereof until written notice of transfer shall have been
filed  with it signed by such  owner in form  satisfactory  to the  Agent.  Each
Lender  acknowledges that it has independently and without reliance on the Agent
or any  other  Lender  and  based  upon  such  information,  investigations  and
inquiries as it deems  appropriate  made its own credit analysis and decision to
extend credit to the Borrowers. It shall be the responsibility of each Lender to
keep  itself  informed  as to the  creditworthiness  of the  Borrowers  and  the
Subsidiaries  and the Agent shall have no  liability  to any Lender with respect
thereto.

       Section  11.4.  Costs and  Expenses.  Each Lender agrees to reimburse the
Agent for all out-of-pocket costs and expenses suffered or incurred by the Agent
or any  security  trustee  in  


                                      -36-
<PAGE>

performing its duties  hereunder and under the Collateral  Documents,  or in the
exercise of any right or power  imposed or  conferred  upon the Agent  hereby or
thereby, to the extent that the Agent is not promptly reimbursed for same by the
Borrowers or out of the  Collateral,  all such costs and expenses to be borne by
the  Lenders  ratably  in  accordance  with  the  amounts  of  their  respective
Commitments.  If any Lender  fails to  reimburse  the Agent for its share of any
such costs and expenses,  such costs and expenses  shall be paid pro rata by the
remaining  Lenders,  but without in any manner  releasing the defaulting  Lender
from its liability hereunder.

       Section 11.5. Indemnity. The Lenders shall ratably indemnify and hold the
Agent,  and  its  directors,  officers,  employees,  agents  or  representatives
(including as such any security trustee therefor)  harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by them hereunder or
under  the  Collateral   Documents  or  in  connection  with  the   transactions
contemplated hereby or thereby,  regardless of when asserted or arising,  except
to the extent they are promptly  reimbursed for the same by the Borrowers or out
of the Collateral and except to the extent that any event giving rise to a claim
was caused by the gross negligence or willful misconduct of the party seeking to
be indemnified.  If any Lender defaults in its obligations hereunder,  its share
of the obligations shall be paid pro rata by the remaining Lenders,  but without
in any manner releasing the defaulting Lender from its liability hereunder.

SECTION 12. MISCELLANEOUS.

       Section 12.1. Payments Free of Withholding. Each payment by the Borrowers
under this  Agreement or the Notes shall be made without  withholding  for or on
account of any present or future  taxes  (other than overall net income taxes on
the recipient)  imposed by or within the  jurisdiction  in which any Borrower is
domiciled,  any jurisdiction  from which any Borrower makes any payment,  or any
political  subdivision  or taxing  authority  thereof  or  therein.  If any such
withholding is so required,  the relevant  Borrower shall make the  withholding,
pay  the  amount  withheld  to the  appropriate  governmental  authority  before
penalties  attached  thereto or interest  accrues thereon and forthwith pay such
additional  amount as may be  necessary  to ensure that the net amount  actually
received  by each  Lender and the Agent free and clear of such taxes  (including
such taxes on such  additional  amount) is equal to the amount which that Lender
or the Agent (as the case may be) would have received had such  withholding  not
been  made.  If the Agent or any  Lender  pays any amount in respect of any such
taxes,  penalties or interest the relevant Borrower shall reimburse the Agent or
that Lender for that payment on demand in the currency in which such payment was
made. If the relevant  Borrower pays any such taxes,  penalties or interest,  it
shall deliver official tax receipts  evidencing that payment or certified copies
thereof to the Lender or Agent on whose account such  withholding was made (with
a copy to the Agent if not the  recipient  of the  original)  on or  before  the
thirtieth day after payment.

       Section 12.2. Holidays. If any payment of principal or interest on any of
the Notes or any fees shall  fall due on a  Saturday,  Sunday or on another  day
which is a legal  holiday for lenders in the State of Illinois,  (i) interest at
the rates such Notes bear for the period  prior to  maturity  shall  continue to
accrue on such  principal  from the stated due date thereof to and including the
next succeeding Business Day and (ii) such principal, interest and fees shall be
payable on such succeeding Business Day.

                                      -37-
<PAGE>



       Section 12.3. No Waiver,  Cumulative Remedies. No delay or failure on the
part of any  Lender in the  exercise  of any power or right  shall  operate as a
waiver thereof,  nor as an acquiescence in any default nor preclude any other or
further exercise  thereof,  or the exercise of any other power or right, and the
rights  and  remedies  hereunder  of the  Lenders  are  cumulative  to,  and not
exclusive of, any rights or remedies which any of them would otherwise have.


        Section  12.4.  Waivers,  Modifications  and  Amendments.  Any provision
hereof or of the Notes or the  Collateral  Documents  may be amended,  modified,
waived or released and any Default or Event of Default and its  consequences may
be rescinded and annulled upon the written consent of the Lenders. No amendment,
modification or waiver of the Agent's  protective  provisions shall be effective
without the prior written consent of the Agent.

       Section  12.5.  Costs and Expenses.  The Borrowers  jointly and severally
agree to pay on demand all  reasonable  out-of-pocket  costs and expenses of the
Agent  and  each  Lender  in  connection  with  the  negotiation,   preparation,
execution,  delivery,  recording  or filing or  release of this  Agreement,  the
Notes,  the Collateral  Documents and the other  instruments and documents to be
delivered  hereunder  or  thereunder  or in  connection  with  the  transactions
contemplated  hereby or thereby or in connection with any consents  hereunder or
thereunder  or waivers or amendments  hereto or thereto,  including the fees and
out-of-pocket  expenses of counsel for the Agent and each Lender with respect to
all of the foregoing, and all recording,  filing, title insurance or other fees,
costs and taxes incident to perfecting a lien upon the  collateral  security for
the Notes and the  other  Obligations,  and all  reasonable  costs and  expenses
(including reasonable attorneys' fees) incurred by the Agent, the Lenders or any
other holders of a Note in connection  with a default or the enforcement of this
Agreement, the Notes, the Collateral Documents, the other Loan Documents and the
other instruments and documents to be delivered  hereunder or thereunder and all
costs,  fees and taxes of the types  enumerated  above incurred in supplementing
(and recording or filing supplements to) the Collateral  Documents in connection
with assignments  contemplated by Section 12.17 hereof (collectively,  "Security
Assignment  Costs") if  counsel to the Agent  believes  such  supplements  to be
appropriate or desirable. The Borrowers agree to indemnify and save the Lenders,
the Agent and any  security  trustee for the Lenders  harmless  from any and all
liabilities,  losses,  costs and expenses  (including any of such arising out of
the violation or the operation of any environmental law) incurred by the Lenders
or the Agent in connection with any action,  suit or proceeding  brought against
the Agent,  security trustee or any Lender by any person which arises out of the
transactions  contemplated  or financed  hereby or by the Notes,  the Collateral
Documents or out of any action or inaction by the Agent, any security trustee or
any Lender hereunder or thereunder,  except for such thereof as is caused by the
gross negligence or willful  misconduct of the party  indemnified and except for
costs or liabilities  incurred in suits which are exclusively  among the Lenders
or the  Lenders  and the Agent.  The  provisions  of this  Section  12.5 and the
protective provisions of Section 2 hereof shall survive payment of the Notes.

       Section 12.6.  Documentary  Taxes.  The  Borrowers  jointly and severally
agree  that they will pay on demand  any  documentary,  stamp or  similar  taxes
payable in  respect of this  Agreement,  the Notes or any  Collateral  Document,
including  interest  and  penalties,  in the event


                                      -38-
<PAGE>



any such taxes are assessed,  irrespective  of when such  assessment is made and
whether or not any credit to it is then in use or available.

       Section  12.7.  Survival  of   Representations,   Indemnities  and  Agent
Provisions.  All representations and warranties made herein or in the Collateral
Documents or in certificates  given pursuant hereto or thereto shall survive the
execution  and delivery of this  Agreement,  the  Collateral  Documents  and the
Notes,  and shall  continue in full force and effect with respect to the date as
of which they were made as long as any credit is in use or available  hereunder.
All  indemnities  and all other  provisions  relative  to  reimbursement  to the
Lenders of amounts  sufficient  to protect the yield of the Lenders with respect
to the Loans, including, but not limited to, Section 2.7 and Section 2.8 hereof,
shall survive the termination of this Agreement and the payment of the Loans and
the Notes.  The  provisions  of  Sections  3.5 and 9 hereof  shall  survive  the
termination of this Agreement and the payment of the Loans and the Notes.

       Section  12.8.  Construction.  The parties  hereto  acknowledge  that all
parties hereto contributed to the negotiation of this Agreement.

       Section 12.9. Accounting Principles.  All computations of compliance with
the terms hereof shall be made on the basis of generally accepted  principles of
accounting  as in effect as of the date of this  Agreement  applied  in a manner
consistent  with those used in the  preparation  of the financial  statements of
Badger and the  Subsidiaries  referred  to in the first  sentence of Section 5.6
hereof, but subject  nevertheless to the express variations from such principles
provided for herein.

       Section  12.10.  Addresses  for Notices.  Except as  otherwise  specified
herein, all notices hereunder shall be in writing (including cable,  telecopy or
telex)  and  shall be given to the  relevant  party at its  address,  telecopier
number or telex number set forth below, in the case of the Borrowers,  or on the
appropriate  signature page hereof,  in the case of the Banks and the Agent,  or
such  other  address,  telecopier  number  or telex  number  as such  party  may
hereafter  specify  by notice to the  Agent and the  Borrowers,  given by United
States certified or registered  mail, by telecopy or by other  telecommunication
device  capable or  creating a written  record of such  notice and its  receipt.
Notices hereunder to the Borrowers shall be addressed to:

                           200 West Front Street
                           Peshtigo, Wisconsin 54157
                           Attention: George Zimmerman
                           Telephone: (715) 582-5334
                           Telecopy: (715) 582-5242

Each such notice, request or other communication shall be effective (i) if given
by  telecopier,  when such  telecopy is  transmitted  to the  telecopier  number
specified in this Section and a confirmation  of such telecopy has been received
by the sender,  (ii) if given by telex,  when such telex is  transmitted  to the
telex number specified in this Section and the answerback is received by sender,
(iii) if given by mail, five (5) days after such  communication  is deposited in
the mail,  certified or registered with return receipt  requested,  addressed as
aforesaid or (iv) if given by any other means,  when  delivered at the addresses
specified in this Section;  provided that any notice given pursuant to Section 1
hereof shall be effective only upon receipt.

                                      -39-
<PAGE>



       Section  12.11.  Headings.  Article  and  Section  headings  used in this
Agreement  are for  convenience  of  reference  only  and are not a part of this
Agreement for any other purpose.

       Section  12.12.  Severability  of  Provisions.   Any  provision  of  this
Agreement  which  is  unenforceable  in  any  jurisdiction  shall,  as  to  such
jurisdiction,  be  ineffective  to the extent of such  unenforceability  without
invalidating  the  remaining  provisions  hereof or  affecting  the  validity or
enforceability of such provision in any other jurisdiction. All rights, remedies
and powers provided in this Agreement and the Notes may be exercised only to the
extent that the  exercise  thereof  does not violate  any  applicable  mandatory
provisions of law, and all the  provisions  of this  Agreement and the Notes are
intended to be subject to all applicable  mandatory  provisions of law which may
be controlling  and to be limited to the extent  necessary so that they will not
render this Agreement or the Notes invalid or unenforceable.

       Section 12.13. Counterparts. This Agreement may be executed in any number
of counterparts,  and by different parties hereto on separate counterparts,  and
all such  counterparts  taken together shall be deemed to constitute one and the
same instrument.

       Section 12.14.  Binding Nature and Governing Law. This Agreement shall be
binding upon the Borrowers and its  successors  and assigns,  and shall inure to
the  benefit of the Lenders and the  benefit of their  successors  and  assigns,
including any subsequent  holder of an interest of the Notes. This Agreement and
the Notes and the rights and duties of the parties hereto shall be construed and
determined in accordance with, and shall be governed by the internal laws of the
State of  Illinois  without  regard  to  principles  of  conflicts  of law.  The
Borrowers may not assign its rights hereunder without the written consent of the
Lenders.

       Section 12.15. Entire  Understanding.  This Agreement,  together with the
Notes and the Collateral Documents,  constitutes the entire understanding of the
parties  with  respect to the subject  matter  hereof and any prior  agreements,
whether written or oral, with respect thereto are superseded hereby.

       Section  12.16.  Sharing of Set-Off and  Information.  Each Lender agrees
with each other  Lender that if such Lender  receives and retains any payment of
principal or interest,  whether by set-off or application of deposit balances or
otherwise  ("Set-off"),  on any of its Loans outstanding under this Agreement in
excess of its  ratable  share of such  payments  on all Loans,  then such Lender
shall purchase for cash at face value, but without  recourse,  ratably from each
of the other Lenders such amount of the Loans held by each such other Lender (or
interest  therein)  as shall be  necessary  to cause  such  Lender to share such
excess payment ratably with all the other Lenders;  provided,  however,  that if
any such  purchase  is made by any Lender,  and if such  excess  payment or part
thereof  is  thereafter  recovered  from such  purchasing  Lender,  the  related
purchases  from the other  Lenders  shall be rescinded  ratably and the purchase
price  restored  as to the  portion of such  excess  payment so  recovered,  but
without  interest.  Each  Lender's  ratable  share of any such Set-off  shall be
determined by the  proportion  that the  aggregate  amount of Loans then due and
payable to such Lender bears to the total aggregate amount of the Loans then due
and payable to all the Lenders.  Each Lender  agrees with each other Lender that
it will use its best  efforts  to  deliver to all the  Lenders  any  information
concerning any Borrower which a Lender may receive from any Borrower;  provided,
that no Lender  shall  incur any  liability  to any other  Lender for failing to
deliver any such information.


                                      -40-
<PAGE>



       Section 12.17. Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other bank or other lending institution (a
"Participant") provided that (i) no Participant shall thereby acquire any direct
rights under this  Agreement,  (ii) no Lender shall agree with a Participant not
to exercise any of its rights hereunder  without the consent of such Participant
except for rights  which  under the terms  hereof may only be  exercised  by all
Lenders and (iii) no sale of a  participation  in  extensions of credit shall in
any manner relieve the selling Lender of its obligations hereunder.

       Section 12.18.  Assignment of  Commitments by Lenders.  Each Lender shall
have the right at any time,  with the prior  written  consent  of the Agent and,
prior to the  occurrence  of a Default  or Event of Default  hereunder  with the
prior  written  consent  of Badger  (which  consent  shall  not be  unreasonably
withheld),  to  sell,  assign,  transfer  or  negotiate  all or any  part of its
Commitment to one or more commercial banks or other financial institutions. Upon
any such assignment and its notification to the Agent, the assignee shall become
a Lender  hereunder,  all Loans and the  Commitment  it thereby  holds  shall be
governed by all the terms and conditions  hereof,  and the Lender  granting such
assignment  shall  have  its  Commitment  and  its  obligations  and  rights  in
connection  therewith,  reduced  by the  amount  of such  assignment.  Upon  the
effectiveness  of any such  assignment  the  Borrower  shall  execute  new Notes
payable to the Assignor and Assignee in the amount of their new Commitments.

       Section  12.19.  Set Off.  In  addition  to any rights  now or  hereafter
granted  under  applicable  law and not by way of limitation of any such rights,
upon the  occurrence  of any Event of Default,  each Lender and each  subsequent
holder of any Note is hereby authorized by the Borrower at any time or from time
to time, without notice to the Borrowers or to any other Person, any such notice
being hereby  expressly  waived,  to set off and to appropriate and to apply any
and  all  deposits  (general  or  special,   including,   but  not  limited  to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts,  and in whatever currency denominated) and any
other  indebtedness  at any time held or owing by that Lender or that subsequent
holder to or for the  credit or the  account  of any  Borrower,  whether  or not
matured,  against  and on  account of the  obligations  and  liabilities  of the
Borrowers  to that Bank or that  subsequent  holder  under  the Loan  Documents,
including,  but not limited to, all claims of any nature or description  arising
out of or connected with the Loan Documents,  irrespective of whether or not (a)
that Lender or that  subsequent  holder shall have made any demand  hereunder or
(b) the principal of or the interest on the Loans or Notes and other amounts due
hereunder  shall have become due and payable  pursuant to Section 8 and although
said  obligations  and  liabilities,  or  any of  them,  may  be  contingent  or
unmatured.

       Section  12.20.  Terms of Collateral  Documents not  Superseded.  Nothing
contained  herein  shall be deemed or  construed  to permit any act or  omission
which is prohibited by the terms of any Collateral  Document,  the covenants and
agreements contained herein being in addition to and not in substitution for the
covenants and agreements contained in the Collateral Documents.

       Section 12.21. PERSONAL JURISDICTION.

       (a)  NON-EXCLUSIVE  JURISDICTION.  THE  BORROWERS  HEREBY  SUBMIT  TO THE
NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF  ILLINOIS  AND OF AN  ILLINOIS  STATE  COURT  SITTING IN THE CITY OF
CHICAGO


                                      -41-
<PAGE>

FOR  PURPOSES  OF ALL  LEGAL  PROCEEDINGS  ARISING  OUT OF OR  RELATING  TO THIS
AGREEMENT,  THE COLLATERAL DOCUMENTS OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR
THEREBY.  THE BORROWERS  IRREVOCABLY  WAIVE, TO THE FULLEST EXTENT  PERMITTED BY
LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY  SUCH  PROCEEDING  BROUGHT  IN SUCH A COURT  AND ANY  CLAIM  THAT  ANY  SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

       (b) OTHER  JURISDICTION.  THE BORROWERS  AGREE THAT THE AGENT AND EACH OF
THE  LENDERS  SHALL  HAVE THE RIGHT TO  PROCEED  AGAINST  THE  BORROWERS  OR ITS
PROPERTY  ("PROPERTY")  IN A COURT IN ANY  LOCATION  TO ENABLE  THE Agent OR ANY
LENDER TO REALIZE ON  PROPERTY,  OR TO ENFORCE A JUDGMENT  OR OTHER  COURT ORDER
ENTERED IN FAVOR OF THE AGENT OR ANY LENDER.  THE BORROWERS AGREE THAT THEY WILL
NOT ASSERT ANY PERMISSIVE  COUNTERCLAIMS IN ANY proceeding BROUGHT IN ACCORDANCE
WITH THIS  PROVISION  BY THE AGENT OR ANY LENDER TO REALIZE ON  PROPERTY,  OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT OR ANY LENDER. THE
BORROWERS WAIVE ANY OBJECTION THAT THEY MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE AGENT OR ANY LENDER  HAS  COMMENCED  A  PROCEEDING  DESCRIBED  IN THIS
SUBSECTION.

       SECTION 12.22.  WAIVER OF JURY TRIAL.  THE BORROWERS,  THE AGENT AND EACH
LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER  SOUNDING IN  CONTRACT,  TORT,  OR  OTHERWISE,  BETWEEN THE AGENT OR ANY
LENDER  AND  THE  BORROWERS  ARISING  OUT  OF,  CONNECTED  WITH,  RELATED  TO OR
INCIDENTAL TO THE  RELATIONSHIP  ESTABLISHED  AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT,  DOCUMENT OR AGREEMENT  EXECUTED OR DELIVERED
IN  CONNECTION  THEREWITH  OR THE  TRANSACTIONS  RELATED  THERETO.  EACH  OF THE
BORROWERS,  THE AGENT AND THE LENDERS  HEREBY  AGREE AND  CONSENT  THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL  COUNTERPART  OF A COPY OF THIS
AGREEMENT  WITH ANY COURT AS WRITTEN  EVIDENCE  OF THE  CONSENT  OF THE  PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

       SECTION 12.23.  ADVICE OF COUNSEL.  THE BORROWERS  REPRESENT TO THE AGENT
AND EACH LENDER THAT IT HAS DISCUSSED THIS AGREEMENT WITH ITS LAWYERS.

                                      -42-
<PAGE>




       Upon your acceptance  hereof in the manner  hereinafter  set forth,  this
Agreement shall be a contract between us for the purposes hereinabove set forth.

       Dated as of January 29, 1999.

                                       BADGER PAPER MILLS, INC.


                                       By /s/
                                          Name_____________________________
                                          Title____________________________


                                       BADGER PAPER MILLS FLEXIBLE PACKAGING
                                          DIVISION, INC. (formerly known as
                                          PLASTECHS, INC.)


                                       By /s/
                                         Name_____________________________
                                         Title____________________________

       Accepted  and Agreed to at Chicago,  Illinois as of the day and year last
above written.

Amount and Percentage of Commitment:

         $12,000,000                   HARRIS TRUST AND SAVINGS BANK
            (100%)

                                       By /s/
                                       Its Vice President

                                           111 West Monroe Street
                                           Chicago, Illinois  60690
                                           Attention:  ____________________

                                           LIBOR Funding Office:
                                           Nassau Branch
                                           c/o 111 West Monroe Street
                                           Chicago, Illinois  60690



                                      -43-
<PAGE>



                                     

                                    EXHIBIT A

                              REVOLVING CREDIT NOTE

                                                               Chicago, Illinois
$------------------------------------                       ------------, -----

       On  the   Termination   Date,  for  value  received,   the   undersigned,
_____________________,  a _________________ corporation (the "Borrower"), hereby
promises to pay to the order of  ______________________  (the "Lender"),  at the
principal  office  of  Harris  Trust  and  Savings  Bank,  as Agent in  Chicago,
Illinois, the principal sum of (i) ______________________  Dollars ($_________),
or (ii) such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all loans
owing from the Borrower to the Lender under the Revolving Credit provided for in
the Credit Agreement hereinafter mentioned.

       This Note evidences loans  constituting part of a "Domestic Rate Portion"
and "LIBOR  Portions"  as such terms are  defined in that  certain  Amended  and
Restated  Credit  Agreement dated as of  _______________,  1999 by and among the
Borrower,  Harris  Trust and  Savings  Bank,  as Agent and others  (the  "Credit
Agreement")  made  and to be  made  to the  Borrower  by the  Lender  under  the
Revolving  Credit  provided  for under the Credit  Agreement,  and the  Borrower
hereby  promises  to pay  interest  at the office  specified  above on each loan
evidenced  hereby  at the  rates  and times  specified  therefor  in the  Credit
Agreement.

       Each loan made  under the  Revolving  Credit  provided  for in the Credit
Agreement by the Lender to the  Borrower  against  this Note,  any  repayment of
principal hereon,  the status of each such loan from time to time as part of the
Domestic  Rate Portion or a LIBOR  Portion and the  interest  rates and interest
periods applicable thereto shall be endorsed by the holder hereof on the reverse
side of this Note or  recorded  on the books and  records of the  holder  hereof
(provided  that such entries  shall be endorsed on the reverse side hereof prior
to any  negotiation  hereof)  and the  Borrower  agrees  that in any  action  or
proceeding instituted to collect or enforce collection of this Note, the entries
so endorsed  on the reverse  side hereof or recorded on the books and records of
the Lender shall be prima facie  evidence of the unpaid balance of this Note and
the status of each Loan from time to time as part of a Domestic  Rate Portion or
a LIBOR Portion and the interest rates and interest periods applicable thereto.

       This Note is issued by the Borrower under the terms and provisions of the
Credit  Agreement and is secured,  inter alia, by certain  Security  Agreements,
Mortgages,  Deed of Trust and other instruments and documents from the Borrower,
and this Note and the holder  hereof are  entitled  to all of the  benefits  and
security  provided for thereby or referred to therein,  equally and ratably with
all other  notes  thereby  secured,  to which  reference  is  hereby  made for a
statement thereof.  This Note may be declared to be, or be and become, due prior
to its expressed  maturity upon the occurrence of an event of default  specified
in the Credit Agreement,  voluntary  prepayments may be made hereon, and certain
prepayments are required to be made hereon,  all in the events, on the terms and
with the effects provided in the Credit  Agreement.  All capitalized 



                            
<PAGE>

terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.

       This  Note is  issued  in  substitution  for and in  replacement  of that
certain  Revolving Credit Note dated as of June 30, 1993, issued by the Borrower
in favor of the Lender in the face principal amount of $_____________.

       This Note shall be construed  in  accordance  with,  and governed by, the
internal laws of the State of Illinois  without regard to principles of conflict
of law.

       All  amounts  payable  under the terms of the Note shall be payable  with
collection costs,  including  attorney's fees, and without relief from valuation
and appraisement laws.

       The Borrower and any endorsers severally hereby waive demand, presentment
for  payment  and  notice of  nonpayment  of this  Note and each of them  hereby
consents  to any  renewals  or  extensions  of the time of  payment of this Note
without notice.

                                          --------------------------------------


                                          By
                                          Its___________________________________



                                      A-2
<PAGE>

                                                       

                                    EXHIBIT B

                                THE SUBSIDIARIES


                                       JURISDICTION OF
NAME                                    INCORPORATION              PERCENTAGE
                                                                    OWNERSHIP

Badger Paper Mills Flexible               Wisconsin                   100%
    Packaging Division, Inc.

Peshtigo Power L.L.C.                     Wisconsin                   100%



<PAGE>

                                    



                                    EXHIBIT C

                                 FORM OF OPINION

                              _______________, 1999


Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois  60690

Gentlemen:

       We have  served as counsel  to Badger  Paper  Mills,  Inc.,  a  Wisconsin
corporation ("Badger") and Badger Paper Mills Flexible Packaging Division, Inc.,
a  Wisconsin  corporation  (formerly  known  as  PlasTechs,  Inc.,  a  Wisconsin
corporation) ("PlasTechs")  (collectively,  Badger and PlasTechs are hereinafter
sometimes  referred to as the  "Borrowers"  and  individually  each is sometimes
referred to as a "Borrower"),  in connection  with the credit  facilities  being
made available by you (the "Lenders") to the Borrowers. As such counsel, we have
supervised  the taking of the corporate  proceedings  necessary to authorize the
execution  and  delivery  of,  and have  examined  executed  originals  of,  the
instruments and documents  identified on Exhibit A to this letter  (collectively
the "Loan Documents", individual Loan Documents and other capitalized terms used
below being hereinafter referred to by the designations appearing on Exhibit A).
As counsel to the Borrowers, we are familiar with the articles of incorporation,
charter,  by-laws and any other  agreements under which each of the Borrowers is
organized. We have also examined such other instruments and records and inquired
into such other  factual  matters  and  matters of law as we deem  necessary  or
pertinent to the formulation of the opinions hereinafter expressed.

       Based upon the  foregoing  and upon our  examination  of the  articles of
incorporation,  charter  and  by-laws  of each of the  Borrowers,  we are of the
opinion that:

       1. Badger is validly existing as a corporation in good standing under the
laws  of the  State  of  Wisconsin;  and  PlasTechs  is  validly  existing  as a
corporation in good standing  under the laws of the State of Wisconsin.  Each of
the Borrowers has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted and as contemplated
in the Credit Agreement. Each Borrower is duly licensed or qualified and in good
standing in each  jurisdiction  where any of the property subject to the lien of
the  Collateral  Documents  is located or where a lien thereon is required to be
perfected or enforced, or where the failure to be so licensed or qualified would
have a material  adverse  effect on the  business,  operations or assets of such
Borrower.

       2. Each Borrower has full right,  power and authority to borrow from you,
to mortgage,  pledge, assign and otherwise encumber its assets and properties as
collateral  security  for such  borrowings,  to  execute  and  deliver  the Loan
Documents  executed  by it and to observe and perform all the matters and things
therein provided for. The execution and delivery of the Loan 



<PAGE>

Documents  executed  by the  Borrowers  do  not,  nor  will  the  observance  or
performance of any of the matters or things therein provided for, contravene any
provision of law or of the articles of incorporation,  charter or by-laws of the
Borrowers  (there  being no other  agreements  under  which  the  Borrowers  are
organized) or, to the best of our knowledge after due inquiry,  of any covenant,
indenture or agreement  binding upon or affecting  the Borrowers or any of their
respective properties or assets.

       3. The Loan  Documents  executed by each of the Borrowers  have been duly
authorized by all necessary  corporate  action (no  stockholder  approval  being
required),  have been executed and  delivered by the proper  officers of each of
the  Borrowers  and  constitute  valid  and  binding  agreements  of each of the
Borrowers  enforceable  against each of them in accordance with their respective
terms, except as such terms may be limited by bankruptcy,  insolvency or similar
laws and legal or equitable  principles affecting or limiting the enforcement of
creditors' rights generally.

       4. The  Collateral  Documents  are adequate to create and provide for the
liens and security interests  contemplated  thereby for the benefit and security
of all the indebtedness  secured thereby. The foregoing opinion assumes that the
Badger Mortgage and the PlasTechs Mortgage and appropriate  financing statements
have been duly filed in the proper public offices.  We express no opinion herein
with respect to the priority of the liens and security  interest  created by the
Collateral  Documents  over the  rights  of other  creditors  of the  respective
Borrowers.  However, in the course of our  representations of the Borrowers,  no
fact has come to our attention  which would  indicate  that any other  creditors
would  have  priority  over the  liens and  security  interests  created  by the
Collateral Documents.

       5. No order,  authorization,  consent, license or exemption of, or filing
or   registration   with,  any  court  or   governmental   department,   agency,
instrumentality  or regulatory body, whether local, state or federal (except for
such of the foregoing which have already been obtained),  is or will be required
in connection  with the lawful  execution and delivery of the Loan  Documents or
the observance and performance by the Borrowers of any of the terms thereof.

       6. To the best of our knowledge after due inquiry and except as set forth
in the Credit Agreement,  there is no action, suit,  proceeding or investigation
at law or in equity  before or by any court or public body pending or threatened
against or affecting any of the Borrowers or any of their respective  assets and
properties which, if adversely determined,  could result in any material adverse
change in the properties,  business,  operations or financial  condition of such
Borrower or in the value of the  collateral  security for the Lenders' loans and
other credit accommodations to the Borrowers.

       In rendering the opinions expressed above, we have examined originals, or
copies  of  originals  certified  to  our  satisfaction,   of  such  agreements,
documents,  certificates  and  other  statements  of  government  officials  and
corporate officers and such other papers and evidence as we have deemed relevant
and necessary as a basis for these opinions. We have assumed the authenticity of
all documents  submitted to us as originals and the conformity with the original
documents of any copies thereof submitted to us for our examination.

                                      C-2

<PAGE>

       Our  opinions  expressed  above are  limited  to the laws of the State of
Wisconsin,  the corporate  laws of the State of Delaware and the federal laws of
the United States of America.  In expressing  our opinion as to the validity and
enforceability  of those  Loan  Documents  governed  by the laws of the State of
Illinois,  we have  assumed that the laws of the State of Illinois do not differ
in any respect material to our opinion from the laws of the State of Wisconsin.

                                                  Respectfully submitted,


                                      C-3

<PAGE>



          

                                    Exhibit A

                               THE LOAN DOCUMENTS

         (All Loan Documents are dated as of January 29, 1999.  Harris Trust and
Savings Bank is referred to below as the "Agent".)

       1.     Amended  and  Restated   Credit   Agreement  by  and  between  the
              Borrowers, the Lenders and the Agent (the "Credit Agreement").

       2.     Revolving  Credit  Note of Badger  payable  to the order of Harris
              Trust and Savings Bank in the principal amount of $12,000,000.

       3.     Revolving Credit Note of PlasTechs  payable to the order of Harris
              Trust and Savings Bank in the principal amount of $12,000,000.

       4.     Security  Agreement from Badger to the Agent (the "Badger Security
              Agreement").

       5.     Security  Agreement  from  PlasTechs to the Agent (the  "PlasTechs
              Security Agreement").

       6.     Security Agreement Re: Investment Account from Badger to the Agent
              (the "Badger Investment Security  Agreement") (the Badger Security
              Agreement,  the Badger Security Agreement,  the PlasTechs Security
              Agreement  and the  Badger  Investment  Security  Agreement  being
              hereinafter    collectively   referred   to   as   the   "Security
              Agreements").

       7.     Mortgage and Security  Agreement with Assignment of Rents relating
              to property in Oconto  County,  Wisconsin  from  PlasTechs  to the
              Agent (the "Oconto Mortgage").

       8.     The Security  Agreements and the Oconto Mortgage being hereinafter
              collectively referred to as the "Collateral Documents").




<PAGE>



                               

                                    EXHIBIT D


                            BADGER PAPER MILLS, INC.

                             COMPLIANCE CERTIFICATE


                        FOR THE PERIOD ENDING __________


To:      Harris Trust and Savings Bank
         as Agent under, and the Lenders
         party to the Credit Agreement
         described below

       This Compliance  Certificate is furnished to the Lenders  pursuant to the
requirements  of Section  7.5 of the Credit  Agreement  dated as of January  29,
1999,  by and among  Badger  Paper  Mills,  Inc.  ("Badger")  Badger Paper Mills
Flexible  Packaging  Division,  Inc.,  Harris  Trust and  Savings  Bank as agent
thereunder (the "Agent") and the Lenders named therein (the "Credit Agreement").
Unless otherwise defined herein,  the terms used in this Compliance  Certificate
have the meanings ascribed thereto in the Credit Agreement.

       THE UNDERSIGNED HEREBY CERTIFIES THAT:

       1. I am the duly elected ______________ of the Badger;

       2. We have  reviewed the terms of the Credit  Agreement and we have made,
or have  caused  to be made  under our  supervision,  a  detailed  review of the
transactions and conditions of Badger and the Subsidiaries during the accounting
period covered by the financial  statements  being furnished  concurrently  with
this Certificate;

       3. The  examinations  described in paragraph 2 did not  disclose,  and we
have no knowledge of, the  existence of any  condition or the  occurrence of any
event which  constitutes  a Default or an Event of Default at any time during or
at the  end of the  accounting  period  covered  by the  accompanying  financial
statements  or as  of  the  date  of  this  Certificate,  except  as  set  forth
immediately below;

       4.  The  financial  statements  required  by  Section  7.5 of the  Credit
Agreement and being  furnished to you  concurrently  with this  Certificate  are
true,  correct and complete as of the dates and for the periods covered thereby;
and

       5. Schedule I attached hereto sets forth financial data and  computations
evidencing  Badger's  compliance with certain covenants of the Credit Agreement,
all of which data and computations are true,  complete and correct and have been
made in accordance with the relevant Sections of the Credit Agreement.



<PAGE>

       Described below are the exceptions, if any, to paragraph 3 by listing, in
detail,  the nature of the  condition or event,  the period  during which it has
existed and the action  which Badger has taken,  is taking,  or proposes to take
with respect to each such condition or event:

       ------------------------------------------------------------------

       ------------------------------------------------------------------

       ------------------------------------------------------------------

       ------------------------------------------------------------------

       The foregoing certifications, together with the computations set forth in
Schedule I attached hereto and the financial statements  furnished  concurrently
with this  Certificate  in support  hereof,  are made and  delivered  as of this
______ day of _______________, 19___.


                                  ----------------------------------------------
                                  Title for Badger:


                                  ----------------------------------------------
                                            (Type or Print Name)

                                      D-2