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                                REVOLVING CREDIT

                                       AND

                               SECURITY AGREEMENT





                         PNC BANK, NATIONAL ASSOCIATION
                            (AS LENDER AND AS AGENT)




                                      WITH



                            BADGER PAPER MILLS, INC.
                                   (BORROWER)






                                November 30, 2001



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<PAGE>
                                TABLE OF CONTENTS

I.       DEFINITIONS...........................................................1
         1.1      Accounting Terms.............................................1
         1.2      General Terms................................................1
         1.3      Uniform Commercial Code Terms...............................17
         1.4      Certain Matters of Construction.............................17

II.      ADVANCES, PAYMENTS...................................................17
         2.1      Revolving Advances; Discretionary Rights....................17
                  (a)      Revolving Advances.................................17
                  (a)      Discretionary Rights...............................18
         2.2      Procedure for Revolving Advances Borrowing..................18
         2.3      Disbursement of Advance Proceeds............................21
         2.4      Maximum Advances............................................21
         2.5      Repayment of Advances.......................................21
         2.6      Repayment of Excess Advances................................22
         2.7      Statement of Account........................................22
         2.8      Letters of Credit...........................................22
         2.9      Issuance of Letters of Credit...............................22
         2.10     Requirements For Issuance of Letters of Credit..............23
         2.11     Additional Payments.........................................24
         2.12     Manner of Borrowing and Payment.............................24
         2.13     Use of Proceeds.............................................26
         2.14     Defaulting Lender...........................................26

III.     INTEREST AND FEES....................................................27
         3.1      Interest....................................................27
         3.2      Letter of Credit Fees.......................................28
         3.3      Closing Fee; Facility Fee...................................29
                  (a)      Closing Fee........................................29
                  (b)      Facility Fee.......................................29
         3.4      Collateral Evaluation Fee; Collateral Monitoring Fee........29
                  (a)      Collateral Evaluation Fee..........................29
                  (b)      Collateral Monitoring Fee..........................29
         3.5      Computation of Interest and Fees............................29
         3.6      Maximum Charges.............................................30
         3.7      Increased Costs.............................................30
         3.8      Basis For Determining Interest Rate Inadequate or Unfair....31
         3.9      Capital Adequacy............................................31
         3.10     Gross Up for Taxes..........................................32
         3.11     Withholding Tax Exemption...................................32

IV.      COLLATERAL: GENERAL TERMS............................................33
         4.1      Security Interest in the Collateral.........................33
         4.2      Perfection of Security Interest.............................33

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         4.3      Disposition of Collateral...................................34
         4.4      Preservation of Collateral..................................34
         4.5      Ownership of Collateral.....................................34
         4.6      Defense of Agent's and Lenders' Interests...................35
         4.7      Books and Records...........................................35
         4.8      Financial Disclosure........................................35
         4.9      Compliance with Laws........................................36
         4.10     Inspection of Premises......................................36
         4.11     Insurance...................................................36
         4.12     Failure to Pay Insurance....................................37
         4.13     Payment of Taxes............................................37
         4.14     Payment of Leasehold Obligations............................38
         4.15     Receivables.................................................38
                  (a)  Nature of Receivables..................................38
                  (b)  Solvency of Customers..................................38
                  (c)  Location of Borrower...................................38
                  (d)  Collection of Receivables..............................38
                  (e)  Notification of Assignment of Receivables..............39
                  (f)  Power of Agent to Act on Borrower's Behalf.............39
                  (g)  No Liability...........................................40
                  (h)  Establishment of a Lockbox Account, Dominion Account...40
                  (i)  Adjustments............................................40
         4.16     Inventory...................................................40
         4.17     Maintenance of Equipment....................................41
         4.18     Exculpation of Liability....................................41
         4.19     4.19. Environmental Matters.................................41
         4.20     Financing Statements........................................43

V.       REPRESENTATIONS AND WARRANTIES.......................................43
         5.1      Authority...................................................43
         5.2      Formation and Qualification.................................44
         5.3      Survival of Representations and Warranties..................44
         5.4      Tax Returns.................................................44
         5.5      Financial Statements........................................45
         5.6      Corporate Name..............................................46
         5.7      O.S.H.A. and Environmental Compliance.......................46
         5.8      Solvency; No Litigation, Violation, Indebtedness or Default.46
         5.9      Patents, Trademarks, Copyrights and Licenses................48
         5.10     Licenses and Permits........................................48
         5.11     Default of Indebtedness.....................................48
         5.12     No Default..................................................48
         5.13     No Burdensome Restrictions..................................49
         5.14     No Labor Disputes...........................................49
         5.15     Margin Regulations..........................................49
         5.16     Investment Company Act......................................49
         5.17     Disclosure..................................................49

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<PAGE>
         5.18     Delivery of CDBG Loan Documents, UDAG Loan Documents,
                  Wisconsin Business Bank Loan Documents and
                  Sale/Service Documents......................................49
         5.19     Swaps.......................................................50
         5.20     Conflicting Agreements......................................50
         5.21     Application of Certain Laws and Regulations.................50
         5.22     Business and Property of Borrower...........................50
         5.23     Section 20 Subsidiaries.....................................50

VI.      AFFIRMATIVE COVENANTS................................................50
         6.1      Payment of Fees.............................................50
         6.2      Conduct of Business and Maintenance of Existence and Assets.51
         6.3      Violations..................................................51
         6.4      Government Receivables......................................51
         6.5      Fixed Charge Coverage Ratio.................................51
         6.6      Tangible Net Worth..........................................51
         6.7      Execution of Supplemental Instruments.......................52
         6.8      Payment of Indebtedness.....................................52
         6.9      Standards of Financial Statements...........................52

VII.     NEGATIVE COVENANTS...................................................52
         7.1      Merger, Consolidation, Acquisition and Sale of Assets.......52
         7.2      Creation of Liens...........................................53
         7.3      Guarantees..................................................53
         7.4      Investments.................................................53
         7.5      Loans.......................................................53
         7.6      Capital Expenditures........................................53
         7.7      Dividends...................................................53
         7.8      Indebtedness................................................54
         7.9      Nature of Business..........................................54
         7.10     Transactions with Affiliates................................54
         7.11     Leases......................................................54
         7.12     Subsidiaries................................................54
         7.13     Fiscal Year and Accounting Changes..........................54
         7.14     Pledge of Credit............................................55
         7.15     Amendment of Articles of Incorporation, By-Laws.............55
         7.16     Compliance with ERISA.......................................55
         7.17     Prepayment of Indebtedness..................................55
         7.18     Other Agreements............................................55

VIII.    CONDITIONS PRECEDENT.................................................56
         8.1      Conditions to Initial Advances..............................56
                  (a)      Note...............................................56
                  (b)      Filings, Registrations and Recordings..............56
                  (c)      Corporate Proceedings of Borrower..................56
                  (d)      Incumbency Certificates of Borrower................56
                  (e)      Certificates.......................................57
                  (f)      Good Standing Certificates.........................57

                                      iii
<PAGE>
                  (g)      Legal Opinion......................................57
                  (h)      No Litigation......................................57
                  (i)      Financial Condition Certificates...................57
                  (j)      Collateral Examination.............................57
                  (k)      Fees...............................................58
                  (l)      Pro Forma Financial Statements.....................58
                  (m)      CDBG Loan Documents, UDAG Loan Documents and
                           Wisconsin Business Bank Loan Documents.............58
                  (n)      Mortgagee Waivers..................................58
                  (o)      Equipment Access and Use Agreement.................58
                  (p)      Sewage Treatment Facility Sale/Service.............58
                  (q)      Insurance..........................................58
                  (r)      Payment Instructions...............................59
                  (s)      Blocked Accounts...................................59
                  (t)      Consents...........................................59
                  (u)      No Adverse Material Change.........................59
                  (v)      Leasehold Agreements...............................59
                  (w)      Subsidiary Pledge and Security Agreement...........59
                  (x)      Intellectual Property Security Agreements..........59
                  (y)      Closing Certificate................................59
                  (z)      Borrowing Base.....................................60
                  (aa)     Undrawn Availability...............................60
                  (bb)     Other..............................................60
         8.2      Conditions to Each Advance..................................60
                  (a)      Representations and Warranties.....................60
                  (b)      No Default.........................................60

IX.      INFORMATION AS TO BORROWER...........................................61
         9.1      Disclosure of Material Matters..............................61
         9.2      Schedules...................................................61
         9.3      Environmental Reports.......................................61
         9.4      Litigation..................................................62
         9.5      Material Occurrences........................................62
         9.6      Government Receivables......................................62
         9.7      Annual Financial Statements.................................62
         9.8      Quarterly Financial Statements..............................63
         9.9      Monthly Financial Statements................................63
         9.10     Other Reports...............................................63
         9.11     Additional Information......................................63
         9.12     Projected Operating Budget..................................64
         9.13     Variances From Operating Budget.............................64
         9.14     Notice of Suits, Adverse Events.............................64
         9.15     ERISA Notices and Requests..................................64
         9.16     Additional Documents........................................65

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<PAGE>
X.       EVENTS OF DEFAULT....................................................65

XI.      LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT...........................68
         11.1     Rights and Remedies.........................................68
         11.2     Agent's Discretion..........................................68
         11.3     Setoff......................................................69
         11.4     Rights and Remedies not Exclusive...........................69
         11.5     Allocation of Payments After Event of Default...............69

XII.     WAIVERS AND JUDICIAL PROCEEDINGS.....................................70
         12.1     Waiver of Notice............................................70
         12.2     Delay.......................................................70
         12.3     Jury Waiver.................................................70

XIII.    EFFECTIVE DATE AND TERMINATION.......................................71
         13.1     Term........................................................71
         13.2     Termination.................................................71

XIV.     REGARDING AGENT......................................................72
         14.1     Appointment.................................................72
         14.2     Nature of Duties............................................72
         14.3     Lack of Reliance on Agent and Resignation...................73
         14.4     Certain Rights of Agent.....................................73
         14.5     Reliance....................................................73
         14.6     Notice of Default...........................................74
         14.7     Indemnification.............................................74
         14.8     Agent in its Individual Capacity............................74
         14.9     Delivery of Documents.......................................74
         14.10    Borrower's Undertaking to Agent.............................75

XV.      MISCELLANEOUS........................................................75
         15.1     Governing Law...............................................75
         15.2     Entire Understanding........................................75
         15.3     Successors and Assigns; Participations; New Lenders.........78
         15.4     Application of Payments.....................................79
         15.5     Indemnity...................................................79
         15.6     Notice......................................................80
         15.7     Survival....................................................81
         15.8     Severability................................................81
         15.9     Expenses....................................................82
         15.10    Injunctive Relief...........................................82
         15.11    Consequential Damages.......................................82
         15.12    Captions....................................................82
         15.13    Counterparts; Facsimile Signatures..........................82
         15.14    Construction................................................83
         15.15    Confidentiality; Sharing Information........................83
         15.16    Publicity...................................................83

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List of Exhibits and Schedules
------------------------------

Exhibits
--------
Exhibit 2.1(a) Revolving Credit Note

Exhibit 5.5(b) Financial Projections

Exhibit 8.1(i) Financia l Condition Certificate

Exhibit 15.3 Commitment Transfer Supplement



Schedules
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Schedule 1.2 Permitted Encumbrances

Schedule 4.5 Equipment and Inventory Locations

Schedule 4.19 Real Property

Schedule 5.2(a) States of Qualification and Good Standing

Schedule 5.2(b) Subsidiaries

Schedule 5.4 Federal Tax Identification Number

Schedule 5.6 Prior Names

Schedule 5.7 Environmental

Schedule 5.8(b) Litigation

Schedule 5.8(d) Plans

Schedule 5.9 Intellectual Property, Source Code Escrow Agreements

Schedule 5.10 Licenses and Permits

Schedule 5.14 Labor Disputes

Schedule 7.3 Guarantees

                                       vi
<PAGE>
                                REVOLVING CREDIT
                                       AND
                               SECURITY AGREEMENT

     Revolving Credit and Security Agreement dated as of November 30, 2001 among
BADGER PAPER MILLS, INC., a corporation organized under the laws of the State of
Wisconsin ("Borrower"), the financial institutions which are now or which
hereafter become a party hereto (collectively, the "Lenders " and individually a
"Lender") and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent for Lenders (PNC,
in such capacity, the "Agent").

     IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrower, Lenders and Agent hereby agree as follows:

I.   DEFINITIONS.

     1.1 Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended December 31,
2000.

     1.2 General Terms. For purposes of this Agreement the following terms shall
have the following meanings:

     "Accountants" shall have the meaning set forth in Section 9.7 hereof.

     "Acquisition of Borrower" shall mean (a) the purchase of substantially all
of the assets of Borrower by any Person, or (b) the purchase or other
acquisition of all of the outstanding capital stock of Borrower by any Person or
two or more Persons acting in concert, whether such purchase or other
acquisition is effected by means of an outright purchase or merger or similar
transaction.

     "Advances" shall mean and include the Revolving Advances and Letters of
Credit.

     "Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.

     "Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 5% or
more of the
<PAGE>
securities having ordinary voting power for the election of directors of such
Person, or (y) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

     "Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.

     "Alternate Base Rate " shall mean, for any day, a rate per annum equal to
the higher of (i) the Base Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.

     "Applicable Law" shall mean all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant, Other Document or contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of any Governmental Body, and all orders,
judgments and decrees of all courts and arbitrators.

     "Authority" shall have the meaning set forth in Section 4.19(d).

     "Base Rate " shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

     "Blocked Accounts" shall have the meaning set forth in Section 4.15(h).

     "Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.

     "Borrower's Account" shall have the meaning set forth in Section 2.7.

     "Business Day" shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.

     "Capital Expenditures" shall mean expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.

     "Capitalized Lease Obligation" shall mean any Indebtedness of Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.


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<PAGE>
     "CDBG Lien" shall mean the security interest of Marinette County, Wisconsin
in certain Equipment which secures Borrower's obligations and indebtedness under
the CDBG Loan Documents.

     "CDBG Loan" shall mean the term loan from Marinette County, Wisconsin in
the original principal amount of $160,000 made pursuant to the terms of the CDBG
Loan Documents.

     "CDBG Loan Documents" shall mean the Wisconsin Community Development Block
Grant Agreement, dated September 27, 2001, among the Wisconsin Department of
Commerce, Marinette County, Wisconsin and Borrower, the Promissory Note, dated
September 13, 2001, issued by Borrower to Marinette County, Wisconsin in the
principal amount of $160,000 and the Selective Business Security Agreement by
Borrower in favor of Marinette County, Wisconsin.

     "CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.

     "Change of Control" shall mean (a) the acquisition by any Person, or two or
more Persons acting in concert, including, without limitation, any acquisition
effected by means of a merger or consolidation, of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 50% or more of the outstanding shares of
voting stock of Borrower, or (b) the occurrence of a change in the Board of
Directors of the Borrower during any period in which the individuals who
constituted the Board of Directors of the Borrower at the beginning of such
period (together with any other director whose election by the Board of
Directors of Borrower or whose nomination for election by the stockholders of
Borrower was approved by a vote of at least (i) a majority (if there are 8 or
less directors then in office) or (ii) two-thirds (if there are more than 8
directors then in office) of the directors then in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors of the Borrower then in office.

     "Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, Borrower or any
of its Affiliates.

     "Closing Date" shall mean November 30, 2001 or such other date as may be
agreed to by the parties hereto.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and the regulations promulgated thereunder.

     "Collateral" shall mean and include:


                                       3
<PAGE>
          (a) all Receivables;

          (b) all General Intangibles;

          (c) all Inventory;

          (d) all Investment Property;

          (e) all Subsidiary Membership Interests;

          (f) all of Borrower's right, title and interest in and to (i) its
     respective goods and other property (other than Equipment, fixtures and
     Real Property) including, but not limited to, all merchandise returned or
     rejected by Customers, relating to or securing any of the Receivables; (ii)
     all of Borrower's rights as a consignor, a consignee, an unpaid vendor,
     mechanic, artisan, or other lienor, including stoppage in transit, setoff,
     detinue, replevin, reclamation and repurchase; (iii) all additional amounts
     due to Borrower from any Customer relating to the Receivables; (iv) other
     property, including warranty claims, relating to any goods securing this
     Agreement; (v) all of Borrower's contract rights, rights of payment which
     have been earned under a contract right, instruments (including promissory
     notes), documents, chattel paper (including electronic chattel paper),
     warehouse receipts, deposit accounts, letters of credit and money; (vi) all
     commercial tort claims (whether now existing or hereafter arising); (vii)
     if and when obtained by Borrower, all real and personal property of third
     parties in which Borrower has been granted a lien or security interest as
     security for the payment or enforcement of Receivables; and (viii) any
     other goods, personal property or real property now owned or hereafter
     acquired in which Borrower has expressly granted a security interest or may
     in the future grant a security interest to Agent hereunder, or in any
     amendment or supplement hereto or thereto, or under any other agreement
     between Agent and Borrower;

          (g) all of Borrower's ledger sheets, ledger cards, files,
     correspondence, records, books of account, business papers, computer
     software (owned by Borrower or in which it has an interest), computer
     programs, tapes, disks and documents relating to (a), (b), (c), (d), (e) or
     (f) of this Paragraph; and

          (h) all proceeds and products of (a), (b), (c), (d), (e), (f) and (g)
     in whatever form, including, but not limited to: cash, deposit accounts
     (whether or not comprised solely of proceeds), certificates of deposit,
     insurance proceeds under policies insuring the foregoing (including hazard,
     flood and credit insurance), negotiable instruments and other instruments
     for the payment of money, chattel paper, security agreements, documents,
     eminent domain proceeds, condemnation proceeds and tort claim proceeds.

     "Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 15.3(b) hereof.


                                       4
<PAGE>
     "Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

     "Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on Borrower's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.

     "Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.

     "Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.

     "Debt Payments" shall mean and include all cash actually expended by
Borrower to make (a) interest payments on any Advances hereunder and on the UDAG
Loan and the Wisconsin Business Bank Loan and the CDBG Loan, plus (b) scheduled
principal payments on the UDAG Loan and the Wisconsin Business Bank Loan and the
CDBG Loan, plus (c) payments of all fees, commissions and charges set forth
herein and with respect to any Advance and set forth in the UDAG Loan Documents
and the Wisconsin Business Bank Loan Documents and the CDBG Loan Documents, plus
(d) capitalized lease payments, plus (e) payments with respect to any other
Indebtedness for borrowed money.

     "Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.

     "Default Rate" shall have the meaning set forth in Section 3.1 hereof.

     "Defaulting Lender" shall have the meaning set forth in Section 2.14(a)
hereof.

     "Depository Accounts" shall have the meaning set forth in Section 4.15(h)
hereof.

     "Documents" shall have the meaning set forth in Section 8.1(c) hereof.

     "Dollar" and the sign "$" shall mean lawful money of the United States of
America.

     "Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Alternate Base Rate.

     "Early Termination Date" shall have the meaning set forth in Section 13.1
hereof.


                                       5
<PAGE>
     "Earnings Before Interest and Taxes" shall mean for any period the sum of
(i) the consolidated net income (or loss) of Borrower and its Subsidiaries for
such period (excluding extraordinary gains and losses), plus (ii) all interest
expense of Borrower and its Subsidiaries for such period, plus (iii) all charges
against income of Borrower and its Subsidiaries for such period for federal,
state and local taxes actually paid.

     "EBITDA" shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.

     "Eligible Inventory " shall mean and include Inventory valued at the lower
of cost or market value, determined on a first-in-first-out basis, which is not,
in Agent's opinion, obsolete, slow moving or unmerchantable and which Agent, in
its sole discretion exercised in a commercially reasonable manner, shall not
deem ineligible Inventory, based on such considerations as Agent may from time
to time deem appropriate including, without limitation, whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent and
whether the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over such
goods or the use or sale thereof. Eligible Inventory shall include all Inventory
in-transit for which title has passed to Borrower, which is insured to the full
value thereof and for which Agent shall have in its possession (a) all
negotiable bills of lading properly endorsed and (b) all non-negotiable bills of
lading issued in Agent's name.

     "Eligible Receivables" shall mean and include with respect to Borrower,
each Receivable of Borrower arising in the ordinary course of Borrower's
business and which Agent, in its sole credit judgment exercised in a
commercially reasonable manner, shall deem to be an Eligible Receivable, based
on such considerations as Agent may from time to time deem appropriate. A
Receivable shall not be deemed eligible unless such Receivable is subject to
Agent's first priority perfected security interest and no other Lien (other than
Permitted Encumbrances), and is evidenced by an invoice or other documentary
evidence satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:

          (a) it arises out of a sale made by Borrower to an Affiliate of
     Borrower or to a Person controlled by an Affiliate of Borrower;

          (b) it is due or unpaid more than ninety (90) days after the original
     invoice date;

          (c) fifty percent (50%) or more of the Receivables from such Customer
     are not deemed Eligible Receivables hereunder. Such percentage may, in
     Agent's sole discretion exercised in a commercially reasonable manner, be
     increased or decreased from time to time;

          (d) any covenant, representation or warranty contained in this
     Agreement with respect to such Receivable has been breached;

          (e) the Customer shall (i) apply for, suffer, or consent to the
     appointment of, or the taking of possession by, a receiver, custodian,
     trustee or liquidator


                                       6
<PAGE>
     of itself or of all or a substantial part of its property or call a meeting
     of its creditors, (ii) admit in writing its inability, or be generally
     unable, to pay its debts as they become due or cease operations of its
     present business, (iii) make a general assignment for the benefit of
     creditors, (iv) commence a voluntary case under any state or federal
     bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
     bankrupt or insolvent, (vi) file a petition seeking to take advantage of
     any other law providing for the relief of debtors, (vii) acquiesce to, or
     fail to have dismissed, any petition which is filed against it in any
     involuntary case under such bankruptcy laws, or (viii) take any action for
     the purpose of effecting any of the foregoing;

          (f) the sale is to a Customer outside the United States of America or
     Canada (excluding the Province of Quebec), unless the sale is on letter of
     credit, guaranty or acceptance terms, in each case acceptable to Agent in
     its sole discretion exercised in a commercially reasonable manner;

          (g) the sale to the Customer is on a bill-and-hold, guaranteed sale,
     sale-and-return, sale on approval, consignment or any other repurchase or
     return basis or is evidenced by chattel paper;

          (h) Agent believes, in its sole judgment exercised in a commercially
     reasonable manner, that collection of such Receivable is insecure or that
     such Receivable may not be paid by reason of the Customer's financial
     inability to pay;

          (i) the Customer is the United States of America, any state or any
     department, agency or instrumentality of any of them, unless Borrower
     assigns its right to payment of such Receivable to Agent pursuant to the
     Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
     seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
     other applicable statutes or ordinances;

          (j) the goods giving rise to such Receivable have not been shipped to
     the Customer or its designee or the services giving rise to such Receivable
     have not been performed by Borrower or the Receivable otherwise does not
     represent a final sale;

          (k) the Receivables of the Customer exceed a credit limit determined
     by Agent, in its sole discretion exercised in a commercially reasonable
     manner, to the extent such Receivable exceeds such limit;

          (l) such portion of any Receivable that is subject to any offset,
     deduction, defense, dispute, or counterclaim, the Customer is also a
     creditor or supplier of Borrower or the Receivable is contingent in any
     respect or for any reason;

          (m) Borrower has made any agreement with any Customer for any
     deduction therefrom, except for discounts or allowances made in the
     ordinary course of business for prompt payment, all of which discounts or
     allowances are reflected in the calculation of the face value of each
     respective invoice related thereto;

          (n) any return, rejection or repossession of the merchandise has
     occurred or the rendition of services has been disputed;


                                       7
<PAGE>
          (o) such Receivable is not payable to Borrower; or

          (p) such Receivable is not otherwise satisfactory to Agent as
     determined in good faith by Agent in the exercise of its discretion in a
     commercially reasonable manner.

     "Environmental Complaint" shall have the meaning set forth in Section
4.19(d) hereof.

     "Environmental Laws " shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.

     "Equipment" shall mean and include all of Borrower's goods (other than
Inventory) whether now owned or hereafter acquired and wherever located
including, without limitation, all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

     "Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by PNC by dividing (the resulting quotient rounded upwards, if necessary, to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by PNC in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the average of the London interbank offered rates
for U.S. Dollars quoted by the British Bankers' Association as set forth on
Bridge Information Services (formerly known as Dow Jones Markets Service) (or
appropriate successor or, if British Banker's Association or its successor
ceases to provide such quotes, a comparable replacement determined by PNC)
display page 3750 (or such other display page on the Bridge Information Services
system as may replace display page 3750) two (2) Business Days prior to the
first day of such Interest Period for an amount comparable to such Eurodollar
Rate Loan and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Reserve Percentage. The
Eurodollar Rate may also be expressed by the following formula:

     Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate =Bridge Information Services display page 3750 or appropriate
successor 1.00 - Reserve Percentage.

     "Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.

     "Event of Default" shall have the meaning set forth in Article X hereof.


                                       8
<PAGE>
     "Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.

     "Finished Goods Inventory " shall mean Inventory which is readily saleable
to Customers as finished goods without further processing or finishing and which
Agent, in its discretion, deems appropriate for classification as finished
goods.

     "Fixed Charge Coverage Ratio" shall mean and include, with respect to any
fiscal period, the ratio of (i) EBITDA minus non-financed capital expenditures
made by Borrower during such period, minus income taxes actually paid by
Borrower during such period, minus cash dividends actually paid by Borrower
during such period, to (b) all Debt Payments during such period.

     "Formula Amount" shall have the meaning set forth in Section 2.1(a).

     "GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.

     "General Intangibles" shall mean and include all of Borrower's general
intangibles, whether now owned or hereafter acquired including, without
limitation, all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and dates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to Borrower
to secure payment of any of the Receivables by a Customer (other than to the
extent covered by Receivables) all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).

     "Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

     "Hazardous Discharge" shall have the meaning set forth in Section 4.19(d)
hereof.

     "Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA or any other applicable
environmental law and in the regulations adopted pursuant thereto.


                                       9
<PAGE>
     "Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.

     "Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities

     (except capital stock and surplus earned or otherwise) and in any event,
without limitation by reason of enumeration, shall include all indebtedness,
debt and other similar monetary obligations of such Person whether direct or
guaranteed, and all premiums, if any, due at the required prepayment dates of
such indebtedness, and all indebtedness secured by a Lien on assets owned by
such Person, whether or not such indebtedness actually shall have been created,
assumed or incurred by such Person. Any indebtedness of such Person resulting
from the acquisition by such Person of any assets subject to any Lien shall be
deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

     "Ineligible Security" shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

     "Intellectual Property Security Agreements " shall mean, collectively, (i)
the Trademark Collateral Security and Pledge Agreement between Borrower and
Agent providing for the grant of a security interest in Borrower's rights in
trademarks and related intellectual property, and (ii) the Patent Collateral
Assignment and Security Agreement between Borrower and Agent providing for the
grant of a security interest in Borrower's rights in patents and related
intellectual property, each, as security for the Obligations, and each together
with all extensions, renewals, amendments, supplements, modifications,
substitutions and replacements thereto and thereof.

     "Interest Period" shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.2(b).

     "Inventory " shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any consignment arrangement, contract of service
or held for sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description which are or might
be used or consumed in Borrower's business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents of title or
other documents representing them.

     "Inventory Advance Rates" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.

     "Investment Property" shall mean and include all of Borrower's now owned or
hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.


                                       10
<PAGE>
     "Issuer" shall mean any Person who issues a Letter of Credit.

     "Leasehold Interests" shall mean all of Borrower's right, title and
interest in and to the premises located at 701 Ralph Lemorande Drive, Oconto
Falls, Wisconsin.

     "Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

     "Letter of Credit Fees" shall have the meaning set forth in Section 3.2.

     "Letters of Credit" shall have the meaning set forth in Section 2.8.

     "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.

     "Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of Borrower, (b) Borrower's
ability to pay the Obligations in accordance with the terms thereof, (c) the
value of the Collateral, or Agent's Liens on the Collateral or the priority of
such Liens or (d) the practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other Documents.

     "Maximum Revolving Advance Amount" shall mean $15,000,000.

     "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.

     "Note" shall mean the Revolving Credit Note.

     "Obligations " shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to Lenders or
Agent or to any other direct or indirect subsidiary or affiliate of Agent or any
Lender of any kind or nature, present or future (including, without limitation,
any interest accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document,

     (including, without limitation, this Agreement and the Other Documents)
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other similar
agreement, or in any other manner, whether arising out of overdrafts or deposit
or other accounts or electronic funds transfers (whether through automated
clearing houses or


                                       11
<PAGE>
otherwise) or out of the Agent's or any Lenders non-receipt of or inability to
collect funds or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Agent or Lenders and Borrower and any amendments, extensions, renewals or
increases and all costs and expenses of Agent and any Lender incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not limited to reasonable
attorneys' fees and expenses and all obligations of Borrower to Agent or Lenders
to perform acts or refrain from taking any action.

     "Orderly Liquidation Value" shall mean the value determined, from time to
time, by MAI certified appraisers satisfactory to Agent as the average net
realizable value of Borrower's Inventory (calculated separately for Finished
Goods Inventory and Raw Materials Inventory) recoverable in an orderly
liquidation thereof.

     "Original Term" shall have the meaning set forth in Section 13.1 hereof.

     "Other Documents" shall mean the Note, the Questionnaire, the Subsidiary
Pledge and Security Agreement, the Intellectual Property Security Agreements and
any other agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, interest or currency swap
agreements or other similar agreements and all other writings heretofore, now or
hereafter executed by Borrower and/or delivered to Agent or any Lender in
respect of the transactions contemplated by this Agreement.

     "Out-of-Formula Loans" shall have the meaning set forth in Section 15.2(b).

     "Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.

     "Participant " shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.

     "Payment Office" shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrower and to each Lender to be the
Payment Office.

     "PBGC" shall mean the Pension Benefit Guaranty Corporation.

     "Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not


                                       12
<PAGE>
delinquent or being contested in good faith and by appropriate proceedings and
with respect to which proper reserves have been taken by Borrower; provided,
that, the Lien shall have no effect on the priority of the Liens in favor of
Agent or the value of the assets in which Agent has such a Lien and a stay of
enforcement of any such Lien shall be in effect; (c) Liens disclosed in the
financial statements referred to in Section 5.5, the existence of which Agent
has consented to in writing; (d) deposits or pledges to secure obligations under
worker's compensation, social security or similar laws, or under unemployment
insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics', workers', materialmen's or other like Liens arising in
the ordinary course of Borrower's business with respect to obligations which are
not due or which are being contested in good faith by Borrower; (g) Liens placed
upon fixed assets (and the proceeds thereof) hereafter acquired to secure a
portion of the purchase price thereof, provided that (x) any such lien shall not
encumber any other property of Borrower and (y) the aggregate amount of
Indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year shall not exceed the amount provided for in Section 7.8; (h)
other Liens incidental to the conduct of Borrower's business or the ownership of
its property and assets which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not in the
aggregate materially detract from Agent's or Lenders' rights in and to the
Collateral or the value of Borrower's property or assets or which do not
materially impair the use thereof in the operation of Borrower's business; (i)
the Wisconsin Business Bank Lien; (j) the UDAG Lien; (k) the CDBG Lien; and (l)
Liens disclosed on Schedule 1.2.

     "Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government

     (whether federal, state, county, city, municipal or otherwise, including
any instrumentality, division, agency, body or department thereof).

     "Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA, maintained for employees of Borrower or any member of the
Controlled Group or any such Plan to which Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.

     "Pro Forma Balance Sheet" shall have the meaning set forth in Section
5.5(a) hereof.

     "Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.

     "Projections " shall have the meaning set forth in Section 5.5(b) hereof.

     "Purchasing Lender" shall have the meaning set forth in Section 15.3
hereof.

     "Questionnaire " shall mean the Documentation Information Questionnaire and
the responses thereto provided by Borrower and delivered to Agent.


                                       13
<PAGE>
     "Raw Materials Inventory" shall mean Inventory (excluding work in process
and packaging) which is classified as raw materials on Borrower's books and
records consisting of items such as cellophane, cores and plugs, inks,
nonwovens, paper, poly ethl, poly prop and solvents and which Agent, in its
discretion, deems appropriate for classification as raw materials.

     "RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C.ss.ss.6901 et seq., as same may be amended from time to time.

     "Real Property" shall mean all of Borrower's right, title and interest in
and to the owned and leased premises identified on Schedule 4.19 hereto.

     "Receivables" shall mean and include, as to Borrower, all of Borrower's
accounts, contract rights, instruments (including those evidencing indebtedness
owed to Borrower by its Affiliates), documents, chattel paper (including
electronic chattel paper), general intangibles relating to accounts, drafts and
acceptances, credit card receivables and all other forms of obligations owing to
Borrower arising out of or in connection with the sale or lease of Inventory or
the rendition of services, all supporting obligations, guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Agent hereunder.

     "Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.

     "Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.

     "Renewal Term(s)" shall have the meaning set forth in Section 13.1 hereof.

     "Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.

     "Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66-2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding sixty-six and two-thirds percent
(66-2/3%) of the Commitment Percentages.

     "Reserve Percentage" shall mean the maximum effective percentage in effect
on any day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding.

     "Revolving Advances" shall mean Advances made other than Letters of Credit.

     "Revolving Credit Note" shall mean, collectively, the promissory notes
referred to in Section 2.1(a) hereof.

     "Revolving Interest Rate" shall mean an interest rate per annum equal to
(a) the Alternate Base Rate with respect to Domestic Rate Loans and (b) the sum
of the Eurodollar Rate plus two and one-half percent (2.50%)with respect to
Eurodollar Rate Loans.


                                       14
<PAGE>
     "Sale/Service Documents" shall mean the Agreement for Sale of Sewage
Treatment Plant Equipment and the Agreement for Repayment of Operating Costs and
City of Peshtigo Sewage Treatment Plant - Subcontract for Supervision, Labor,
Maintenance, Purchasing & Inventory Control and Analytical Service & Reports,
each dated as of October 1, 2001, between Borrower and the City of Peshtigo,
Wisconsin pursuant to which Borrower has sold its sewage treatment plant and
equipment to the City of Peshtigo, Wisconsin and contracted to provide services
to City of Peshtigo regarding such plant and equipment.

     "Section 20 Subsidiary " shall mean the Subsidiary of the bank holding
company controlling PNC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

     "Senior Debt Payments" shall mean and include all cash actually expended by
Borrower to make (a) interest payments on any Advances hereunder, plus (b)
scheduled principal payments on the UDAG Loan, the Wisconsin Business Bank Loan
and the CDBG Loan, plus (c) payments for all fees, commissions and charges set
forth herein and with respect to any Advances, plus (d) capitalized lease
payments, plus (e) payments with respect to any other Indebtedness for borrowed
money.

     "Settlement Date" shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.

     "Subsidiary " shall mean a corporation or other entity of whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.

     "Subsidiary Membership Interests" shall mean all membership interests of
Peshtigo Power, LLC, a Wisconsin limited liability company, owned by Borrower.

     "Subsidiary Pledge and Security Agreement" shall mean the Pledge and
Security Agreement between Borrower and Agent providing for the grant of a
security interest by Borrower in all of Borrower's membership interests in
Peshtigo Power, LLC as security for the Obligations, together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.

     "Tangible Net Worth" shall mean, at a particular date, (a) the aggregate
amount of all assets of Borrower and its Subsidiaries on a consolidated basis as
may be properly classified as such in accordance with GAAP consistently applied
excluding such other assets as are properly classified as intangible assets
under GAAP, less (b) the aggregate amount of all liabilities of Borrower and its
Subsidiaries on a consolidated basis.

     "Term" shall mean the Original Term, as extended for any Renewal Term(s) as
provided in Section 13.1 hereof.


                                       15
<PAGE>
     "Termination Event" shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member of the
Controlled Group from a Plan or Multiemployer Plan during a plan year in which
such entity was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower or
any member of the Controlled Group from a Multiemployer Plan.

     "Toxic Substance" shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601 et seq., applicable state
law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

     "Transactions " shall have the meaning set forth in Section 5.5 hereof.

     "Transferee" shall have the meaning set forth in Section 15.3(b) hereof.

     "UDAG Lien" shall mean the second priority security interest of the City of
Peshtigo, Wisconsin in the Equipment, the first mortgage lien in favor of the
City of Peshtigo, Wisconsin on certain Real Property located in Peshtigo,
Wisconsin and the second mortgage lien in favor of the City of Peshtigo,
Wisconsin on certain other Real Property located in Peshtigo, Wisconsin which
secures Borrower's obligations and indebtedness under the UDAG Loan Documents.

     "UDAG Loan" shall mean the term loan from the City of Peshtigo, Wisconsin
in the principal amount of $1,690,552.14 as of the Closing Date made pursuant to
the UDAG Loan Documents.

     "UDAG Loan Documents" shall mean the City of Peshtigo UDAG Revolving Loan
Fund Loan Agreement, dated as of November 30, 2001, between the City of
Peshtigo, Wisconsin and Borrower, the Promissory Note, dated November 30, 2001,
issued by Borrower to the City of Peshtigo, Wisconsin in the principal amount of
$1,690,552.14, the Chattel Security Agreement, dated November 30, 2001, by
Borrower in favor of the City of Peshtigo, Wisconsin and the two Mortgages,
dated November 30, 2001, by Borrower in favor of the City of Peshtigo,
Wisconsin.

     "Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances plus (ii)
all amounts due and owing to Borrower's trade creditors which are outstanding
beyond normal trade terms, plus (iii) fees and expenses for which Borrower is
liable but which have not been paid or charged to Borrower's Account.

     "Week" shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.


                                       16
<PAGE>
     "Wisconsin Business Bank" shall mean Wisconsin Community Bank, Wisconsin
Business Bank-Branch.

     "Wisconsin Business Bank Lien" shall mean the first priority security
interest of Wisconsin Business Bank in the Equipment and the first mortgage lien
on certain Real Property located in Peshtigo, Wisconsin in favor of Wisconsin
Business Bank which secures Borrower's obligations and indebtedness under the
Wisconsin Business Bank Loan Documents.

     "Wisconsin Business Bank Loan" shall mean the term loan from Wisconsin
Business Bank to Borrower in the original principal amount of $5,000,000 made
pursuant to the terms of the Wisconsin Business Bank Loan Documents.

     "Wisconsin Business Bank Loan Documents" shall mean the Business Loan
Agreement, dated as of November 30, 2001, between Wisconsin Business Bank and
Borrower, the Amendment to Business Loan Agreement and Related Documents, dated
as of November 30, 2001, between Wisconsin Business Bank and Borrower, the
Promissory Note, dated November 30, 2001, issued by Borrower to the Wisconsin
Business Bank in the principal amount of $5,000,000, the Commercial Security
Agreement, dated November 30, 2001, by Borrower in favor of Wisconsin Business
Bank and the Mortgage, dated November 30, 2001, by Borrower in favor of
Wisconsin Business Bank.

     1.3 Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of Illinois from time to time
shall have the meaning given therein unless otherwise defined herein. To the
extent the definition of any category or type of collateral is expanded by any
amendment, modification or revision to the Uniform Commercial Code, such
expanded definition will apply automatically as of the date of such amendment,
modification or revision.

     1.4 Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.

II.  ADVANCES, PAYMENTS.

     2.1 Revolving Advances; Discretionary Rights.

          (a) Revolving Advances. Subject to the terms and conditions set forth
     in this Agreement including, without limitation, Section 2.1(b), each
     Lender, severally and not jointly, will make Revolving Advances to Borrower
     in aggregate amounts outstanding at any time equal to such Lender's
     Commitment Percentage of the lesser of (x) the Maximum


                                       17
<PAGE>
     Revolving Advance Amount less the aggregate amount of outstanding Letters
     of Credit or (y) an amount equal to the sum of:

               (i) up to 85%, subject to the provisions of Section 2.1(b) hereof
          ("Receivables Advance Rate"), of Eligible Receivables, plus

               (ii) up to the lesser of (A) the sum of (I) the lesser of (w)
          65%, subject to the provisions of Section 2.1(b) hereof, of the value
          of the Finished Goods Inventory which constitutes Eligible Inventory,
          or (x) 85%, subject to the provisions of Section 2.1(b) hereof, of the
          Orderly Liquidation Value of all Finished Goods Inventory (the lesser
          of (w) and (x) being the "Finished Goods Inventory Advance Rate"),
          plus (II) the lesser of (y) 16%, subject to the provisions of Section
          2.1(b) hereof, of the value of Raw Materials Inventory which
          constitutes Eligible Inventory, or (z) 85%, subject to the provisions
          of Section 2.1(b) hereof, of the Orderly Liquidation Value of all Raw
          Materials Inventory (the lesser of (y) and (z) being the "Raw
          Materials Inventory Advance Rate" and the Finished Goods Inventory
          Advance Rate and the Raw Materials Inventory Advance Rate being
          referred to collectively as the "Inventory Advance Rates" (the
          Receivables Advance Rate and the Inventory Advance Rates shall be
          referred to collectively, as the "Advance Rates") or (B) $7,000,000 in
          the aggregate at any one time, minus

               (iii) the aggregate amount of outstanding Letters of Credit,
          minus

               (iv) such reserves as Agent may reasonably deem proper and
          necessary from time to time. The amount derived from (x) the sum of
          Sections 2.1(a)(y)(i) and 2.1(a)(y)(ii), minus (y) Sections 2.1
          (a)(y)(iii) and 2.1(a)(y)(iv) at any time and from time to time shall
          be referred to as the "Formula Amount". The Revolving Advances shall
          be evidenced by one or more secured promissory notes (collectively,
          the "Revolving Credit Note ") substantially in the form attached
          hereto as Exhibit 2.1(a).

          (a) Discretionary Rights. The Advance Rates may be increased or
     decreased by Agent at any time and from time to time in the exercise of its
     reasonable discretion. Borrower consents to any such increases or decreases
     and acknowledges that decreasing the Advance Rates or increasing or
     imposing the reserves may limit or restrict Advances requested by Borrower.
     Agent shall use commercially reasonable efforts to give Borrower five (5)
     days prior written notice of its intention to decrease the Advance Rates.

     2.2 Procedure for Revolving Advances Borrowing.

          (a) Borrower may notify Agent prior to 11:00 a.m. on a Business Day of
     Borrower's request to incur, on that day, a Revolving Advance hereunder.
     Should any amount required to be paid as interest hereunder, or as fees or
     other charges under this Agreement or any other agreement with Agent or
     Lenders, or with respect to any other Obligation, become due, same shall be
     deemed a request for a Revolving Advance as of


                                       18
<PAGE>
     the date such payment is due, in the amount required to pay in full such
     interest, fee, charge or Obligation under this Agreement or any other
     agreement with Agent or Lenders, and such request shall be irrevocable.

          (b) Notwithstanding the provisions of subsection (a) above, in the
     event Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall
     give Agent at least three (3) Business Days' prior written notice,
     specifying (i) the date of the proposed borrowing (which shall be a
     Business Day), (ii) the type of borrowing and the amount on the date of
     such Advance to be borrowed, which amount shall be in minimum amounts of
     $500,000 or any multiple of $10,000 in excess thereof, and (iii) the
     duration of the first Interest Period therefor. Interest Periods for
     Eurodollar Rate Loans shall be for one, two or three months; provided, if
     an Interest Period would end on a day that is not a Business Day, it shall
     end on the next succeeding Business Day unless such day falls in the next
     succeeding calendar month in which case the Interest Period shall end on
     the next preceding Business Day. No Eurodollar Rate Loan shall be made
     available to Borrower during the continuance of a Default or an Event of
     Default.

          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on
     the date such Eurodollar Rate Loan is made and shall end on such date as
     Borrower may elect as set forth in subsection (b)(iii) above provided that
     the exact length of each Interest Period shall be determined in accordance
     with the practice of the interbank market for offshore Dollar deposits and
     no Interest Period shall end after the last day of the Term.

          Borrower shall elect the initial Interest Period applicable to a
     Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
     Section 2.2(b) or by its notice of conversion given to Agent pursuant to
     Section 2.2(d), as the case may be. Borrower shall elect the duration of
     each succeeding Interest Period by giving irrevocable written notice to
     Agent of such duration not less than three (3) Business Days prior to the
     last day of the then current Interest Period applicable to such Eurodollar
     Rate Loan. If Agent does not receive timely notice of the Interest Period
     elected by Borrower, Borrower shall be deemed to have elected to convert to
     a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.

          (d) Provided that no Event of Default shall have occurred and be
     continuing, Borrower may, on the last Business Day of the then current
     Interest Period applicable to any outstanding Eurodollar Rate Loan, or on
     any Business Day with respect to Domestic Rate Loans, convert any such loan
     into a loan of another type in the same aggregate principal amount provided
     that any conversion of a Eurodollar Rate Loan shall be made only on the
     last Business Day of the then current Interest Period applicable to such
     Eurodollar Rate Loan. If Borrower desires to convert a loan, Borrower shall
     give Agent not less than three (3) Business Days' prior written notice to
     convert from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1)
     Business Day's prior written notice to convert from a Eurodollar Rate Loan
     to a Domestic Rate Loan, specifying the date of such conversion, the loans
     to be converted and if the conversion is from a Domestic Rate Loan to any
     other type of loan, the duration of the first Interest Period


                                       19
<PAGE>
     therefor. After giving effect to each such conversion, there shall not be
     outstanding more than four (4) Eurodollar Rate Loans, in the aggregate.

          (e) At its option and upon three (3) Business Days' prior written
     notice, Borrower may prepay the Eurodollar Rate Loans in whole at any time
     or in part from time to time with accrued interest on the principal being
     prepaid to the date of such repayment. Borrower shall specify the date of
     prepayment of Advances which are Eurodollar Rate Loans and the amount of
     such prepayment. In the event that any prepayment of a Eurodollar Rate Loan
     is required or permitted on a date other than the last Business Day of the
     then current Interest Period with respect thereto, Borrower shall indemnify
     Agent and Lenders therefor in accordance with Section 2.2(f) hereof.

          (f) Borrower shall indemnify Agent and Lenders and hold Agent and
     Lenders harmless from and against any and all losses or expenses that Agent
     and Lenders may sustain or incur as a consequence of any prepayment,
     conversion of or any default by Borrower in the payment of the principal of
     or interest on any Eurodollar Rate Loan or failure by Borrower to complete
     a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate
     Loan after notice thereof has been given, including, but not limited to,
     any interest payable by Agent or Lenders to lenders of funds obtained by it
     in order to make or maintain its Eurodollar Rate Loans hereunder. A
     certificate as to any additional amounts payable pursuant to the foregoing
     sentence submitted by Agent or any Lender to Borrower shall be conclusive
     absent manifest error.

          (g) Notwithstanding any other provision hereof, if any applicable law,
     treaty, regulation or directive, or any change therein or in the
     interpretation or application thereof, shall make it unlawful for any
     Lender (for purposes of this subsection (g), the term "Lender" shall
     include any Lender and the office or branch where any Lender or any
     corporation or bank controlling such Lender makes or maintains any
     Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the
     obligation of Lenders to make Eurodollar Rate Loans hereunder shall
     forthwith be cancelled and Borrower shall, if any affected Eurodollar Rate
     Loans are then outstanding, promptly upon request from Agent, either pay
     all such affected Eurodollar Rate Loans or convert such affected Eurodollar
     Rate Loans into loans of another type. If any such payment or conversion of
     any Eurodollar Rate Loan is made on a day that is not the last day of the
     Interest Period applicable to such Eurodollar Rate Loan, Borrower shall pay
     Agent, upon Agent's request, such amount or amounts as may be necessary to
     compensate Lenders for any loss or expense sustained or incurred by Lenders
     in respect of such Eurodollar Rate Loan as a result of such payment or
     conversion, including (but not limited to) any interest or other amounts
     payable by Lenders to lenders of funds obtained by Lenders in order to make
     or maintain such Eurodollar Rate Loan. A certificate as to any additional
     amounts payable pursuant to the foregoing sentence submitted by Lenders to
     Borrower shall be conclusive absent manifest error.

     2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by


                                       20
<PAGE>
borrowing, prepaying and reborrowing, all in accordance with the terms and
conditions hereof. The proceeds of each Revolving Advance requested by Borrower
or deemed to have been requested by Borrower under Section 2.2(a) hereof shall,
with respect to requested Revolving Advances to the extent Lenders make such
Revolving Advances, be made available to Borrower on the day so requested by way
of credit to Borrower's operating account at PNC, or such other bank as Borrower
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by Borrower, be disbursed to Agent to be
applied to the outstanding Obligations giving rise to such deemed request.

     2.4 Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount, less outstanding Letters of Credit or (b) the Formula Amount.

     2.5 Repayment of Advances.

          (a) The Revolving Advances shall be due and payable in full on the
     last day of the Term subject to earlier prepayment as herein provided.

          (b) Borrower recognizes that the amounts evidenced by checks, notes,
     drafts or any other items of payment relating to and/or proceeds of
     Collateral may not be collectible by Agent on the date received. In
     consideration of Agent's agreement to conditionally credit Borrower's
     Account as of the Business Day on which Agent receives those items of
     payment, Borrower agrees that, in computing the charges under this
     Agreement, all items of payment shall be deemed applied by Agent on account
     of the Obligations one (1) Business Day after (i) the Business Day Agent
     receives such payments via wire transfer or electronic depository check or
     (ii) in the case of payments received by Agent in any other form, the
     Business Day such payment constitutes good funds in Agent's account. Agent
     is not, however, required to credit Borrower's Account for the amount of
     any item of payment which is unsatisfactory to Agent and Agent may charge
     Borrower's Account for the amount of any item of payment which is returned
     to Agent unpaid.

          (c) All payments of principal, interest and other amounts payable
     hereunder, or under any of the Other Documents shall be made to Agent at
     the Payment Office not later than 1:00 P.M. (New York time) on the due date
     therefor in lawful money of the United States of America in federal funds
     or other funds immediately available to Agent. Agent shall have the right
     to effectuate payment on any and all Obligations due and owing hereunder by
     charging Borrower's Account or by making Advances as provided in Section
     2.2 hereof.

          (d) Borrower shall pay principal, interest, and all other amounts
     payable hereunder, or under any related agreement, without any deduction
     whatsoever, including, but not limited to, any deduction for any setoff or
     counterclaim.

     2.6 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be


                                       21
<PAGE>
immediately due and payable without the necessity of any demand, at the Payment
Office, whether or not a Default or Event of Default has occurred.

     2.7 Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account ") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent or Lenders and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrower a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrower, during such month. The monthly statements shall be deemed
correct and binding upon Borrower in the absence of manifest error and shall
constitute an account stated between Lenders and Borrower unless Agent receives
a written statement of Borrower's specific exceptions thereto within forty-five
(45) days after such statement is received by Borrower. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.

     2.8 Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of Letters of Credit ("Letters of Credit") on
behalf of Borrower; provided, however, that Agent will not be required to issue
or cause to be issued any Letters of Credit to the extent that the face amount
of such Letters of Credit would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) outstanding Letters of Credit to exceed the lesser
of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount. The
maximum amount of outstanding Letters of Credit shall not exceed $2,000,000 in
the aggregate at any time. All disbursements or payments related to Letters of
Credit shall be deemed to be Domestic Rate Loans consisting of Revolving
Advances and shall bear interest at the Revolving Interest Rate for Domestic
Rate Loans; Letters of Credit that have not been drawn upon shall not bear
interest.

     2.9 Issuance of Letters of Credit.

          (a) Borrower may request Agent to issue or cause the issuance of a
     Letter of Credit by delivering to Agent at the Payment Office, Agent's form
     of Letter of Credit Application (the "Letter of Credit Application")
     completed to the satisfaction of Agent; and, such other certificates,
     documents and other papers and information as Agent may reasonably request.
     Borrower also has the right to give instructions and make agreements with
     respect to any application, any applicable letter of credit and security
     agreement, any applicable letter of credit reimbursement agreement and/or
     any other applicable agreement, any letter of credit and the disposition of
     documents, disposition of any unutilized funds, and to agree with Agent
     upon any amendment, extension or renewal of any Letter of Credit.

          (b) Each Letter of Credit shall, among other things, (i) provide for
     the payment of sight drafts when presented for honor thereunder in
     accordance with the terms thereof and when accompanied by the documents
     described therein and (ii) have an expiry date not later than one year
     after such Letter of Credit's date of issuance and in no event later than
     the last day of the Term. Each Letter of Credit shall be subject to the
     Uniform Customs and Practice for Documentary Credits (1993 Revision),
     International


                                       22
<PAGE>
     Chamber of Commerce Publication No. 500, and any amendments or revision
     thereof adhered to by the Issuer and, to the extent not inconsistent
     therewith, the laws of the State of Illinois.

          (c) Agent shall use its reasonable efforts to notify Lenders of the
     request by Borrower for a Letter of Credit hereunder.

     2.10 Requirements For Issuance of Letters of Credit.

          (a) In connection with the issuance of any Letter of Credit, Borrower
     shall indemnify, save and hold Agent, each Lender and each Issuer harmless
     from any loss, cost, expense or liability, including, without limitation,
     payments made by Agent, any Lender or any Issuer and expenses and
     reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising
     out of, or in connection with, any Letter of Credit to be issued for
     Borrower. Borrower shall be bound by Agent's or any Issuer's regulations
     and good faith interpretations of any Letter of Credit issued for
     Borrower's Account, although this interpretation may be different from its
     own; and, neither Agent, nor any Lender, nor any Issuer nor any of their
     correspondents shall be liable for any error, negligence, or mistakes,
     whether of omission or commission, in following Borrower's instructions or
     those contained in any Letter of Credit or of any modifications, amendments
     or supplements thereto or in issuing or paying any Letter of Credit, except
     for Agent's, any Lender's, any Issuer's or such correspondents' gross
     negligence or willful misconduct.

          (b) Borrower shall authorize and direct any Issuer to name Borrower as
     the "Applicant" or "Account Party" of each Letter of Credit. If Agent is
     not the Issuer of any Letter of Credit, Borrower shall authorize and direct
     the Issuer to deliver to Agent all instruments, documents, and other
     writings and property received by the Issuer pursuant to the Letter of
     Credit and to accept and rely upon Agent's instructions and agreements with
     respect to all matters arising in connection with the Letter of Credit or
     the application therefor.

          (c) In connection with all Letters of Credit issued or caused to be
     issued by Agent under this Agreement, Borrower hereby appoints Agent, or
     its designee, as its attorney, with full power and authority if an Event of
     Default or Default shall have occurred and be continuing, (i) to sign
     and/or endorse Borrower's name upon any warehouse or other receipts, letter
     of credit applications and acceptances; (ii) to sign Borrower's name on
     bills of lading; (iii) to clear Inventory through the United States of
     America Customs Department ("Customs") in the name of Borrower or Agent or
     Agent's designee, and to sign and deliver to Customs officials powers of
     attorney in the name of Borrower for such purpose; and (iv) to complete in
     Borrower's name or Agent's, or in the name of Agent's designee, any order,
     sale or transaction, obtain the necessary documents in connection
     therewith, and collect the proceeds thereof. Neither Agent nor its
     attorneys will be liable for any acts or omissions nor for any error of
     judgment or mistakes of fact or law, except for Agent's or its attorney's
     gross negligence or willful misconduct. This power, being coupled with an
     interest, is irrevocable as long as any Letters of Credit remain
     outstanding.


                                       23
<PAGE>
          (d) Each Lender shall to the extent of the percentage amount equal to
     the product of such Lender's Commitment Percentage times the aggregate
     amount of all unreimbursed reimbursement obligations arising from
     disbursements made or obligations incurred with respect to the Letters of
     Credit be deemed to have irrevocably purchased an undivided participation
     in each such unreimbursed reimbursement obligation. In the event that at
     the time a disbursement is made the unpaid balance of Revolving Advances
     exceeds or would exceed, with the making of such disbursement, the lesser
     of the Maximum Revolving Advance Amount or the Formula Amount, and such
     disbursement is not reimbursed by Borrower within two (2) Business Days,
     Agent shall promptly notify each Lender and upon Agent's demand each Lender
     shall pay to Agent such Lender's proportionate share of such unreimbursed
     disbursement together with such Lender's proportionate share of Agent's
     unreimbursed costs and expenses relating to such unreimbursed disbursement.
     Upon receipt by Agent of a repayment from Borrower of any amount disbursed
     by Agent for which Agent had already been reimbursed by Lenders, Agent
     shall deliver to each Lender that Lender's pro rata share of such
     repayment. Each Lender's participation commitment shall continue until the
     last to occur of any of the following events: (A) Agent ceases to be
     obligated to issue or cause to be issued Letters of Credit hereunder; (B)
     no Letter of Credit issued hereunder remains outstanding and uncancelled or
     (C) all Persons (other than Borrower) have been fully reimbursed for all
     payments made under or relating to Letters of Credit.

     2.11 Additional Payments. Any sums expended by Agent or any Lender due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations.

     2.12 Manner of Borrowing and Payment.

          (a) Each borrowing of Revolving Advances shall be advanced according
     to the applicable Commitment Percentages of Lenders.

          (b) Each payment (including each prepayment) by Borrower on account of
     the principal of and interest on the Revolving Advances, shall be applied
     by Agent to the Revolving Advances pro rata according to the applicable
     Commitment Percentages of Lenders. Except as expressly provided herein, all
     payments (including prepayments) to be made by Borrower on account of
     principal, interest and fees shall be made without set off or counterclaim
     and shall be made to Agent on behalf of the Lenders to the Payment Office,
     in each case on or prior to 1:00 P.M., New York time, in Dollars and in
     immediately available funds.

          (c) (i) Notwithstanding anything to the contrary contained in Sections
     2.12(a) and (b) hereof, commencing with the first Business Day following
     the Closing Date, each borrowing of Revolving Advances shall be advanced by
     Agent and each payment by Borrower on account of Revolving Advances shall
     be applied first to those Revolving Advances advanced by Agent. On or
     before 1:00 P.M., New York time, on each Settlement Date commencing with
     the first Settlement Date following the Closing


                                       24
<PAGE>
     Date, Agent and Lenders shall make certain payments as follows: (I) if the
     aggregate amount of new Revolving Advances made by Agent during the
     preceding Week (if any) exceeds the aggregate amount of repayments applied
     to outstanding Revolving Advances during such preceding Week, then each
     Lender shall provide Agent with funds in an amount equal to its applicable
     Commitment Percentage of the difference between (w) such Revolving Advances
     and (x) such repayments and (II) if the aggregate amount of repayments
     applied to outstanding Revolving Advances during such Week exceeds the
     aggregate amount of new Revolving Advances made during such Week, then
     Agent shall provide each Lender with funds in an amount equal to its
     applicable Commitment Percentage of the difference between (y) such
     repayments and (z) such Revolving Advances.

               (ii) Each Lender shall be entitled to earn interest at the
          applicable Revolving Interest Rate on outstanding Advances which it
          has funded.

               (iii) Promptly following each Settlement Date, Agent shall submit
          to each Lender a certificate with respect to payments received and
          Advances made during the Week immediately preceding such Settlement
          Date. Such certificate of Agent shall be conclusive in the absence of
          manifest error.

          (d) If any Lender or Participant (a "benefitted Lender") shall at any
     time receive any payment of all or part of its Advances, or interest
     thereon, or receive any Collateral in respect thereof (whether voluntarily
     or involuntarily or by set-off) in a greater proportion than any such
     payment to and Collateral received by any other Lender, if any, in respect
     of such other Lender's Advances, or interest thereon, and such greater
     proportionate payment or receipt of Collateral is not expressly permitted
     hereunder, such benefitted Lender shall purchase for cash from the other
     Lenders a participation in such portion of each such other Lender's
     Advances, or shall provide such other Lender with the benefits of any such
     Collateral, or the proceeds thereof, as shall be necessary to cause such
     benefitted Lender to share the excess payment or benefits of such
     Collateral or proceeds ratably with each of the other Lenders; provided,
     however, that if all or any portion of such excess payment or benefits is
     thereafter recovered from such benefitted Lender, such purchase shall be
     rescinded, and the purchase price and benefits returned, to the extent of
     such recovery, but without interest. Each Lender so purchasing a portion of
     another Lender's Advances may exercise all rights of payment (including,
     without limitation, rights of set-off) with respect to such portion as
     fully as if such Lender were the direct holder of such portion.

          (e) Unless Agent shall have been notified by telephone, confirmed in
     writing, by any Lender that such Lender will not make the amount which
     would constitute its applicable Commitment Percentage of the Advances
     available to Agent, Agent may (but shall not be obligated to) assume that
     such Lender shall make such amount available to Agent on the next
     Settlement Date and, in reliance upon such assumption, make available to
     Borrower a corresponding amount. Agent will promptly notify Borrower of its
     receipt of any such notice from a Lender. If such amount is made available
     to Agent on a date after such next Settlement Date, such Lender shall pay
     to Agent on demand an amount equal to the product of (i) the daily average
     Federal Funds


                                       25
<PAGE>
     Rate (computed on the basis of a year of 360 days) during such period as
     quoted by Agent, times (ii) such amount, times (iii) the number of days
     from and including such Settlement Date to the date on which such amount
     becomes immediately available to Agent. A certificate of Agent submitted to
     any Lender with respect to any amounts owing under this paragraph (e) shall
     be conclusive, in the absence of manifest error. If such amount is not in
     fact made available to Agent by such Lender within three (3) Business Days
     after such Settlement Date, Agent shall be entitled to recover such an
     amount, with interest thereon at the rate per annum then applicable to such
     Revolving Advances hereunder, on demand from Borrower; provided, however,
     that Agent's right to such recovery shall not prejudice or otherwise
     adversely affect Borrower's rights (if any) against such Lender.

     2.13 Use of Proceeds. Borrower shall apply the proceeds of Advances to (i)
repay existing indebtedness owed to Harris Trust and Savings Bank, (ii) pay fees
and expenses relating to this transaction, and (iii) to provide for its working
capital needs.

     2.14 Defaulting Lender.

          (a) Notwithstanding anything to the contrary contained herein, in the
     event any Lender (x) has refused (which refusal constitutes a breach by
     such Lender of its obligations under this Agreement) to make available its
     portion of any Advance or (y) notifies either Agent or Borrower that it
     does not intend to make available its portion of any Advance (if the actual
     refusal would constitute a breach by such Lender of its obligations under
     this Agreement) (each, a "Lender Default"), all rights and obligations
     hereunder of such Lender (a "Defaulting Lender") as to which a Lender
     Default is in effect and of the other parties hereto shall be modified to
     the extent of the express provisions of this Section 2.14 while such Lender
     Default remains in effect.

          (b) Advances shall be incurred pro rata from Lenders (the
     "Non-Defaulting Lenders") which are not Defaulting Lenders based on their
     respective Commitment Percentages, and no Commitment Percentage of any
     Lender or any pro rata share of any Advances required to be advanced by any
     Lender shall be increased as a result of such Lender Default. Amounts
     received in respect of principal of any type of Advances shall be applied
     to reduce the applicable Advances of each Lender pro rata based on the
     aggregate of the outstanding Advances of that type of all Lenders at the
     time of such application; provided, that, such amount shall not be applied
     to any Advances of a Defaulting Lender at any time when, and to the extent
     that, the aggregate amount of Advances of any Non-Defaulting Lender exceeds
     such Non-Defaulting Lender's Commitment Percentage of all Advances then
     outstanding.

          (c) A Defaulting Lender shall not be entitled to give instructions to
     Agent or to approve, disapprove, consent to or vote on any matters relating
     to this Agreement and the Other Documents. All amendments, waivers and
     other modifications of this Agreement and the Other Documents may be made
     without regard to a Defaulting Lender and, for purposes of the definition
     of "Required Lenders ", a Defaulting Lender shall be deemed not to be a
     Lender and not to have Advances outstanding.


                                       26
<PAGE>
          (d) Other than as expressly set forth in this Section 2.14, the rights
     and obligations of a Defaulting Lender (including the obligation to
     indemnify Agent) and the other parties hereto shall remain unchanged.
     Nothing in this Section 2.14 shall be deemed to release any Defaulting
     Lender from its obligations under this Agreement and the Other Documents,
     shall alter such obligations, shall operate as a waiver of any default by
     such Defaulting Lender hereunder, or shall prejudice any rights which
     Borrower, Agent or any Lender may have against any Defaulting Lender as a
     result of any default by such Defaulting Lender hereunder.

          (e) In the event a Defaulting Lender retroactively cures to the
     satisfaction of Agent the breach which caused a Lender to become a
     Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting
     Lender and shall be treated as a Lender under this Agreement.

III. INTEREST AND FEES.

     3.1 Interest. Interest on Advances shall be payable in arrears on the first
day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months on the anniversary date of the commencement of such
Eurodollar Rate Loan or (b) the end of the Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month at a rate per annum equal to the applicable Revolving Interest Rate
(the "Contract Rate"). Whenever, subsequent to the date of this Agreement, the
Alternate Base Rate is increased or decreased, the Revolving Interest Rate for
Domestic Rate Loans shall be similarly changed without notice or demand of any
kind by an amount equal to the amount of such change in the Alternate Base Rate
during the time such change or changes remain in effect. The Eurodollar Rate
shall be adjusted with respect to Eurodollar Rate Loans without notice or demand
of any kind on the effective date of any change in the Reserve Percentage as of
such effective date. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, (i) at the option of Agent or at the direction
of Required Lenders, the Obligations other than Eurodollar Rate Loans shall bear
interest at the Revolving Interest Rate for Domestic Loans plus two (2%) percent
per annum and (ii) Eurodollar Rate Loans shall bear interest at the Revolving
Interest Rate for Eurodollar Rate Loans plus two (2%) percent per annum (the
"Default Rate").

     3.2 Letter of Credit Fees.

          (a) Borrower shall pay (x) to Agent, for the benefit of Lenders, fees
     for each Letter of Credit for the period from and excluding the date of
     issuance of same to and including the date of expiration or termination,
     equal to the average daily face amount of each outstanding Letter of Credit
     multiplied by two and one-half percent (2.50%) per annum, such fees to be
     calculated on the basis of a 360-day year for the actual number of days
     elapsed and to be payable monthly in arrears on the first day of each month
     and on the last day of the Term and (y) to the Issuer, any and all fees and
     expenses as agreed upon by the Issuer and the Borrower in connection with
     any Letter of Credit, including, without limitation, in connection with the
     opening, amendment or renewal of any such Letter of Credit and shall
     reimburse Agent for any and all fees and


                                       27
<PAGE>
     expenses, if any, paid by Agent to the Issuer (all of the foregoing fees,
     the "Letter of Credit Fees"). All such charges shall be deemed earned in
     full on the date when the same are due and payable hereunder and shall not
     be subject to rebate or proration upon the termination of this Agreement
     for any reason. Any such charge in effect at the time of a particular
     transaction shall be the charge for that transaction, notwithstanding any
     subsequent change in the Issuer's prevailing charges for that type of
     transaction. All Letter of Credit Fees payable hereunder shall be deemed
     earned in full on the date when the same are due and payable hereunder and
     shall not be subject to rebate or proration upon the termination of this
     Agreement for any reason.

          On demand, Borrower will cause cash to be deposited and maintained in
     an account with Agent, as cash collateral, in an amount equal to one
     hundred and five percent (105%) of the outstanding Letters of Credit, and
     Borrower hereby irrevocably authorizes Agent, in its discretion, on
     Borrower's behalf and in Borrower's name, to open such an account and to
     make and maintain deposits therein, or in an account opened by Borrower, in
     the amounts required to be made by Borrower, out of the proceeds of
     Receivables or other Collateral or out of any other funds of Borrower
     coming into any Lender's possession at any time. Agent will invest such
     cash collateral (less applicable reserves) in such short-term money-market
     items as to which Agent and Borrower mutually agree and the net return on
     such investments shall be credited to such account and constitute
     additional cash collateral. Borrower may not withdraw amounts credited to
     any such account except upon payment and performance in full of all
     Obligations and termination of this Agreement.

     3.3 Closing Fee; Facility Fee.

          (a) Closing Fee. Upon the execution of this Agreement, Borrower shall
     pay to Agent for the ratable benefit of Lenders a closing fee of $150,000
     less that portion of the commitment fee of $50,000 heretofore paid by
     Borrower to Agent remaining after application of such fee to out of pocket
     expenses.

          (b) Facility Fee. If, for any month during the Term, the sum of (i)
     average daily unpaid balance of the Revolving Advances, plus (ii) the
     average aggregate amount of outstanding Letters of Credit for each day of
     such month does not equal the Maximum Revolving Advance Amount, then
     Borrower shall pay to Agent for the ratable benefit of Lenders a fee at a
     rate equal to one-quarter of one percent (0.25%) per annum on the amount by
     which the Maximum Revolving Advance Amount exceeds such sum. Such fee shall
     be payable to Agent in arrears on the first day of each month with respect
     to the previous month.

     3.4 Collateral Evaluation Fee; Collateral Monitoring Fee.

          (a) Collateral Evaluation Fee. Borrower shall pay Agent a collateral
     evaluation fee equal to $1,000 per month commencing on the first day of the
     month following the Closing Date and on the first day of each month
     thereafter during the Term. The collateral evaluation fee shall be deemed
     earned in full on the date when same is due and payable hereunder and shall
     not be subject to rebate or proration upon termination of this Agreement
     for any reason.


                                       28
<PAGE>
          (b) Collateral Monitoring Fee. Borrower shall pay to Agent on the
     first day of each month following any month in which Agent performs any
     collateral monitoring - namely any field examination, collateral analysis
     or other business analysis, the need for which is to be determined by Agent
     and which monitoring is undertaken by Agent or for Agent's benefit - a
     collateral monitoring fee in an amount equal to $750 per day for each
     person (other than Agent's management personnel) employed to perform such
     monitoring and in an amount equal to $750 per day for each manager of Agent
     performing such monitoring, plus all costs and disbursements incurred by
     Agent in the performance of such examination or analysis.

     3.5 Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.

     3.6 Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower and the provisions hereof
shall be deemed amended to provide for such permissible rate.

     3.7 Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:

          (a) subject Agent or any Lender to any tax of any kind whatsoever with
     respect to this Agreement or any Other Document or change the basis of
     taxation of payments to Agent or any Lender of principal, fees, interest or
     any other amount payable hereunder or under any Other Documents (except for
     changes in the rate of tax on the overall net income of Agent or any
     Lender;

          (b) impose, modify or hold applicable any reserve, special deposit,
     assessment or similar requirement against assets held by, or deposits in or
     for the account of, advances or loans by, or other credit extended by, any
     office of Agent or any Lender, including (without limitation) pursuant to
     Regulation D of the Board of Governors of the Federal Reserve System; or

          (c) impose on Agent or any Lender or the London interbank Eurodollar
     market any other condition with respect to this Agreement or any Other
     Document;


                                       29
<PAGE>
     and the result of any of the foregoing is to increase the cost to Agent or
     any Lender of making, renewing or maintaining its Advances hereunder by an
     amount that Agent or such Lender deems to be material or to reduce the
     amount of any payment (whether of principal, interest or otherwise) in
     respect of any of the Advances by an amount that Agent or such Lender deems
     to be material, then, in any case Borrower shall promptly pay Agent or such
     Lender, upon its demand, such additional amount as will compensate Agent or
     such Lender for such additional cost or such reduction, as the case may be,
     provided that the foregoing shall not apply to increased costs which are
     reflected in the Eurodollar Rate, as the case may be. Agent or such Lender
     shall certify the amount of such additional cost or reduced amount to
     Borrower, and such certification shall be conclusive absent manifest error.

     3.8 Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or any Lender shall have determined that:

          (a) reasonable means do not exist for ascertaining the Eurodollar Rate
     applicable pursuant to Section 2.2 hereof for any Interest Period; or

          (b) Dollar deposits in the relevant amount and for the relevant
     maturity are not available in the London interbank Eurodollar market, with
     respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
     Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar
     Rate Loan, then Agent shall give Borrower prompt written, telephonic or
     telegraphic notice of such determination. If such notice is given, (i) any
     such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan,
     unless Borrower shall notify Agent no later than 10:00 a.m. (New York City
     time) two (2) Business Days prior to the date of such proposed borrowing,
     that its request for such borrowing shall be cancelled or made as an
     unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or
     Eurodollar Rate Loan which was to have been converted to an affected type
     of Eurodollar Rate Loan shall be continued as or converted into a Domestic
     Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m.
     (New York City time) two (2) Business Days prior to the proposed
     conversion, shall be maintained as an unaffected type of Eurodollar Rate
     Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
     converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
     later than 10:00 a.m. (New York City time) two (2) Business Days prior to
     the last Business Day of the then current Interest Period applicable to
     such affected Eurodollar Rate Loan, shall be converted into an unaffected
     type of Eurodollar Rate Loan, on the last Business Day of the then current
     Interest Period for such affected Eurodollar Rate Loans. Until such notice
     has been withdrawn, Lenders shall have no obligation to make an affected
     type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar
     Rate Loans and Borrower shall not have the right to convert a Domestic Rate
     Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
     Eurodollar Rate Loan.

     3.9 Capital Adequacy.

          (a) In the event that Agent or any Lender shall have determined that
     any applicable law, rule, regulation or guideline regarding capital
     adequacy, or any


                                       30
<PAGE>
     change therein, 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
     Agent or any Lender (for purposes of this Section 3.9, the term "Lender"
     shall include Agent or any Lender and any corporation or bank controlling
     Agent or any Lender) and the office or branch where Agent or any Lender (as
     so defined) makes or maintains any Eurodollar Rate Loans 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 Agent or any Lender's
     capital as a consequence of its obligations hereunder to a level below that
     which Agent or such Lender could have achieved but for such adoption,
     change or compliance (taking into consideration Agent's and each Lender's
     policies with respect to capital adequacy) by an amount deemed by Agent or
     any Lender to be material, then, from time to time, Borrower shall pay upon
     demand to Agent or such Lender such additional amount or amounts as will
     compensate Agent or such Lender for such reduction. In determining such
     amount or amounts, Agent or such Lender may use any reasonable averaging or
     attribution methods. The protection of this Section 3.9 shall be available
     to Agent and each Lender regardless of any possible contention of
     invalidity or inapplicability with respect to the applicable law,
     regulation or condition.

          (b) A certificate of Agent or such Lender setting forth such amount or
     amounts as shall be necessary to compensate Agent or such Lender with
     respect to Section 3.9(a) hereof when delivered to Borrower shall be
     conclusive absent manifest error.

     3.10 Gross Up for Taxes. If Borrower shall be required by Applicable Law to
withhold or deduct any taxes from or in respect of any sum payable under this
Agreement or any of the Other Documents, (a) the sum payable to Agent or such
Lender shall be increased as may be necessary so that, after making all required
withholding or deductions, Agent or such Lender (as the case may be) receives an
amount equal to the sum it would have received had no such withholding or
deductions been made, (b) Borrower shall make such withholding or deductions,
and (c) Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with Applicable Law.

     3.11 Withholding Tax Exemption. At least five (5) Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States or any state thereof agrees that it will deliver to Borrower and Agent
two (2) duly completed copies of United States Internal Revenue Service Form
1001 or 4224, certifying in either case that such Lender is entitled to receive
payment under this Agreement and its Notes without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to Borrower and Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three (3) successive calendar years for Form 1001
and one calendar year for Form 4224) or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Agent, in each case, certifying that such Lender is
entitled to receive payments


                                       31
<PAGE>
under this Agreement and its Note without deduction or withholding of any United
States federal income taxes, unless an event (including any change in treaty,
law or regulation) has occurred prior to the date on which any such delivery
would otherwise be required that renders all such forms inapplicable or that
would prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises Borrower and Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income taxes.

IV.  COLLATERAL: GENERAL TERMS.

     4.1 Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest. Borrower shall
promptly provide Agent with written notice of all commercial tort claims, such
notice to contain the case title together with the applicable court and a brief
description of the claim(s). Upon delivery of each such notice, Borrower shall
be deemed to hereby grant to Agent a security interest and lien in and to such
commercial tort claims and all proceeds thereof.

     4.2 Perfection of Security Interest. Borrower shall take all action that
may be necessary or desirable, or that Agent in its discretion exercised in a
commercially reasonable manner may request, so as at all times to maintain the
validity, perfection, enforceability and priority of Agent's security interest
in the Collateral or to enable Agent to protect, exercise or enforce its rights
hereunder and in the Collateral, including, but not limited to, (i) immediately
discharging all Liens other than Permitted Encumbrances, (ii) obtaining
landlords' or mortgagees' lien waivers, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may specify, and stamping
or marking, in such manner as Agent may specify, any and all chattel paper,
instruments, letters of credits and advices thereof and documents evidencing or
forming a part of the Collateral, (iv) entering into warehousing, lockbox and
other custodial arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, control agreements, instruments of pledge,
mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with the
Uniform Commercial Code as adopted in the State of Illinois from time to time.
By its signature hereto, Borrower hereby authorizes Agent to file against
Borrower, one or more financing continuation or amendment statements pursuant to
the Uniform Commercial Code in form and substance satisfactory to Agent. All
charges, expenses and fees Agent may incur in doing any of the foregoing, and
any local taxes relating thereto, shall be charged to Borrower's Account as a
Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at
Agent's option, shall be paid to Agent for its benefit and for the ratable
benefit of Lenders immediately upon demand.


                                       32
<PAGE>
     4.3 Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof or of any
other assets of Borrower whether by sale, lease or otherwise except (a) the sale
of Inventory in the ordinary course of business and the disposition of nominal
amounts of scrap Inventory and (b) the disposition or transfer of obsolete or
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $750,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment or (ii) the proceeds of which are applied to the repayment
of the UDAG Loan and/or the Wisconsin Business Bank Loan and/or the CDBG Loan.

     4.4 Preservation of Collateral. Following the occurrence and during the
continuance of a Default or Event of Default in addition to the rights and
remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such
steps as Agent deems necessary to protect Agent's interest in and to preserve
the Collateral, including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and maintain at any of Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use Borrower's owned or leased lifts, hoists,
trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Borrower shall cooperate
fully with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's expenses
of preserving the Collateral, including any expenses relating to the bonding of
a custodian, shall be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.

     4.5 Ownership of Collateral. With respect to the Collateral and other
assets of Borrower, at the time the Collateral becomes subject to Agent's
security interest: (a) Borrower shall be the sole owner of and fully authorized
and able to sell, transfer, pledge and/or grant a first priority security
interest in each and every item of the Collateral to Agent; and, except for
Permitted Encumbrances the Collateral and other assets of Borrower shall be free
and clear of all Liens and encumbrances whatsoever; (b) each document and
agreement executed by Borrower or delivered by Borrower to Agent or any Lender
in connection with this Agreement shall be true and correct in all respects; (c)
all signatures and endorsements of Borrower that appear on such documents and
agreements shall be genuine and Borrower shall have full capacity to execute
same; and (d) Borrower's Equipment and Inventory shall be located as set forth
on Schedule 4.5 and shall not be removed from such location(s) without the prior
written consent of Agent except with respect to the sale or disposition of
Inventory in the ordinary course of business and Equipment to the extent
permitted in Section 4.3 hereof.

     4.6 Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral or other assets of Borrower. Borrower shall


                                       33
<PAGE>
defend Agent's interests in the Collateral against any and all Persons
whatsoever. At any time following demand by Agent for payment of all Obligations
after the occurrence and during the continuance of an Event of Default, Agent
shall have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including without limitation:
labels, stationery, documents, instruments and advertising materials. If Agent
exercises this right to take possession of the Collateral, Borrower shall, upon
demand, assemble it in the best manner possible and make it available to Agent
at a place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code or
other applicable law. Borrower shall, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehousers or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver same to Agent and/or subject to Agent's order and
if they shall come into Borrower's possession, they, and each of them, shall be
held by Borrower in trust as Agent's trustee, and Borrower will immediately
deliver them to Agent in their original form together with any necessary
endorsement.

     4.7 Books and Records. Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.

     4.8 Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of any of Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations. Borrower hereby authorizes all federal, state
and municipal authorities to furnish to Agent and each Lender copies of reports
or examinations relating to Borrower, whether made by Borrower or otherwise.
Notwithstanding the foregoing, Agent and each Lender will attempt to obtain such
information or materials directly from Borrower prior to obtaining such
information or materials from such accountants or such authorities.

     4.9 Compliance with Laws. Borrower shall comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof or to the operation of
Borrower's business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. Borrower may, however, contest or dispute any
acts, rules, regulations, orders and directions of those bodies or officials in
any reasonable manner, provided that any related Lien is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of Agent to
protect Agent's Lien on or


                                       34
<PAGE>
security interest in the Collateral. The assets of Borrower at all times shall
be maintained in accordance with the requirements of all insurance carriers
which provide insurance with respect to the assets of Borrower so that such
insurance shall remain in full force and effect.

     4.10 Inspection of Premises. At all reasonable times (and, unless a Default
or Event of Default shall have occurred and be continuing, upon reasonable
notice) Agent and each Lender shall have full access to and the right to audit,
check, inspect and make abstracts and copies from Borrower's books, records,
audits, correspondence and all other papers relating to the Collateral and the
operation of Borrower's business. Agent, any Lender and their agents may enter
upon any of Borrower's premises at any time during business hours and at any
other reasonable time, and from time to time (and, unless a Default or Event of
Default shall have occurred and be continuing, upon reasonable notice), for the
purpose of inspecting the Collateral and any and all records pertaining thereto
and the operation of Borrower's business.

     4.11 Insurance. Borrower shall bear the full risk of any loss of any nature
whatsoever with respect to the Collateral. At Borrower's own cost and expense in
amounts and with carriers reasonably acceptable to Agent, Borrower shall (a)
keep all its insurable properties and properties in which Borrower has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to Borrower's including, without limitation, business interruption
insurance; (b) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to Borrower insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of Borrower either directly or through authority to draw
upon such funds or to direct generally the disposition of such assets; (c)
maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which Borrower is engaged in business; (e) furnish
Agent with (i) copies of all policies and evidence of the maintenance of such
policies by the renewal thereof at least thirty (30) days before any expiration
date, and (ii) appropriate loss payable endorsements in form and substance
satisfactory to Agent, naming Agent as an additional insured and loss payee as
its interests may appear with respect to all insurance coverage referred to in
clauses (a) (as to the Collateral) and (c) above, and providing (A) that all
proceeds thereunder shall be payable to Agent, (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be
cancelled, amended or terminated unless at least thirty (30) days' prior written
notice is given to Agent. In the event of any loss thereunder, the carriers
named therein hereby are directed by Agent and Borrower to make payment for such
loss to Agent and not to Borrower and Agent jointly. If any insurance losses are
paid by check, draft or other instrument payable to Borrower and Agent jointly,
Agent may endorse Borrower's name thereon and do such other things as Agent may
deem advisable to reduce the same to cash. Agent is hereby authorized to adjust
and compromise claims under insurance coverage referred to in clauses (a) (as to
the Collateral) and (b) above. All loss recoveries received by Agent upon any
such insurance may be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrower
or applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrower to Agent, on demand.


                                       35
<PAGE>
     4.12 Failure to Pay Insurance. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of Borrower,
and charge Borrower's Account therefor as a Revolving Advance of a Domestic Rate
Loan and such expenses so paid shall be part of the Obligations.

     4.13 Payment of Taxes. Borrower will pay, when due, all taxes, assessments
and other Charges lawfully levied or assessed upon Borrower or any of the
Collateral including, without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment, social security
benefits, withholding, and sales taxes. If any tax by any governmental authority
is or may be imposed on or as a result of any transaction between Borrower and
Agent or any Lender which Agent or any Lender may be required to withhold or pay
or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent's or any
Lender's opinion, may possibly create a valid Lien on the Collateral, Agent may
without notice to Borrower pay the taxes, assessments or other Charges and
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. Agent will not pay any taxes, assessments or Charges to the extent that
Borrower has contested or disputed those taxes, assessments or Charges in good
faith, by expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related tax lien is stayed and sufficient reserves
are established to the reasonable satisfaction of Agent to protect Agent's
security interest in or Lien on the Collateral. The amount of any payment by
Agent under this Section 4.13 shall be charged to Borrower's Account as a
Revolving Advance and added to the Obligations and, until Borrower shall furnish
Agent with an indemnity therefor (or supply Agent with evidence satisfactory to
Agent that due provision for the payment thereof has been made), Agent may hold
without interest any balance standing to Borrower's credit (up to the amount of
the payment made by Agent under this Section 4.13) and Agent shall retain its
security interest in any and all Collateral held by Agent.

     4.14 Payment of Leasehold Obligations. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and, to the extent reasonably necessary for the normal conduct of
Borrower's business, shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request will provide evidence of having done so.

     4.15 Receivables.

          (a) Nature of Receivables. Each of the Receivables shall be a bona
     fide and valid account representing a bona fide indebtedness incurred by
     the Customer therein named, for a fixed sum as set forth in the invoice
     relating thereto (provided immaterial or unintentional invoice errors shall
     not be deemed to be a breach hereof) with respect to an absolute sale or
     lease and delivery of goods upon stated terms of Borrower, or work, labor
     or services theretofore rendered by Borrower as of the date each Receivable
     is created. Same shall be due and owing in accordance with Borrower's
     standard terms of sale without dispute, setoff or counterclaim except as
     may be stated on the accounts receivable schedules delivered by Borrower to
     Agent.


                                       36
<PAGE>
          (b) Solvency of Customers. Each Customer, to the best of Borrower's
     knowledge, as of the date each Receivable is created, is and will be
     solvent and able to pay all Receivables on which the Customer is obligated
     in full when due or with respect to such Customers of Borrower who are not
     solvent Borrower has set up on its books and in its financial records bad
     debt reserves adequate to cover such Receivables.

          (c) Location of Borrower. Borrower's chief executive office is located
     at 200 West Front Street, Peshtigo, Wisconsin 54157-0149. Until written
     notice is given to Agent by Borrower of any other office at which Borrower
     keeps its records pertaining to Receivables, all such records shall be kept
     at such executive office.

          (d) Collection of Receivables. Until Borrower's authority to do so is
     terminated by Agent (which notice Agent may give at any time following the
     occurrence and during the continuance of an Event of Default or a Default
     or when Agent in its sole discretion exercised in commercially reasonable
     manner deems it to be in Lenders' best interest to do so), Borrower will,
     at Borrower's sole cost and expense, but on Agent's behalf and for Agent's
     account, collect as Agent's property and in trust for Agent all amounts
     received on Receivables, and shall not commingle such collections with
     Borrower's funds or use the same except to pay Obligations. Borrower shall
     deposit in the Blocked Account (or, at Agent's election pursuant to Section
     4.15(h), in a Depository Account) or, upon request by Agent, deliver to
     Agent, in original form and on the date of receipt thereof, all checks,
     drafts, notes, money orders, acceptances, cash and other evidences of
     Indebtedness.

          (e) Notification of Assignment of Receivables. At any time, Agent
     shall have the right to send notice of the assignment of, and Agent's
     security interest in, the Receivables to any and all Customers or any third
     party holding or otherwise concerned with any of the Collateral.
     Thereafter, Agent shall have the sole right to collect the Receivables,
     take possession of the Collateral, or both. Agent's actual collection
     expenses, including, but not limited to, stationery and postage, telephone
     and telegraph, secretarial and clerical expenses and the salaries of any
     third party collection personnel used for collection, may be charged to
     Borrower's Account and added to the Obligations. To facilitate the exercise
     of Agent's rights under this Agreement and applicable law to collect the
     Receivables, Borrower hereby grants to Agent the right to use and operate
     any and all of Borrower's computer equipment and accessories for a period
     of 90 days following the occurrence and during the continuance of an Event
     of Default.

          (f) Power of Agent to Act on Borrower's Behalf. Agent shall have the
     right to receive, endorse, assign and/or deliver in the name of Agent or
     Borrower any and all checks, drafts and other instruments for the payment
     of money relating to the Receivables, and Borrower hereby waives notice of
     presentment, protest and non-payment of any instrument so endorsed.
     Borrower hereby constitutes Agent or Agent's designee as Borrower's
     attorney with power (i) to endorse Borrower's name upon any notes,
     acceptances, checks, drafts, money orders or other evidences of payment or
     Collateral; (ii) to sign Borrower's name on any invoice or bill of lading
     relating to any of the Receivables, drafts against Customers, assignments
     and verifications of Receivables; (iii) to send verifications of
     Receivables to any Customer; (iv) to sign Borrower's name on all financing
     statements or any other documents or instruments deemed necessary or
     appropriate by Agent to preserve, protect, or perfect Agent's interest in
     the


                                       37
<PAGE>
     Collateral and to file same; (v) to demand payment of the Receivables; (vi)
     to enforce payment of the Receivables by legal proceedings or otherwise;
     (vii) to exercise all of Borrower's rights and remedies with respect to the
     collection of the Receivables and any other Collateral; (viii) to settle,
     adjust, compromise, extend or renew the Receivables; (ix) to settle, adjust
     or compromise any legal proceedings brought to collect Receivables; (x) to
     prepare, file and sign Borrower's name on a proof of claim in bankruptcy or
     similar document against any Customer; (xi) to prepare, file and sign
     Borrower's name on any notice of Lien, assignment or satisfaction of Lien
     or similar document in connection with the Receivables; and (xii) to do all
     other acts and things necessary to carry out this Agreement. All acts of
     said attorney or designee in accordance with the foregoing are hereby
     ratified and approved, and said attorney or designee shall not be liable
     for any acts of omission or commission nor for any error of judgment or
     mistake of fact or of law, unless done willfully or with gross (not mere)
     negligence; this power being coupled with an interest is irrevocable while
     any of the Obligations remain unpaid. Agent shall have the right at any
     time upon the occurrence and during the continuance of a Default or an
     Event of Default to change the address for delivery of mail addressed to
     Borrower to such address as Agent may designate and to receive, open and
     dispose of all mail addressed to Borrower.

          (g) No Liability. Neither Agent nor any Lender shall, under any
     circumstances or in any event whatsoever, have any liability for any error
     or omission or delay of any kind occurring in the settlement, collection or
     payment of any of the Receivables or any instrument received in payment
     thereof, or for any damage resulting therefrom. Following the occurrence
     and during the continuance of an Event of Default or Default Agent may,
     without notice or consent from Borrower, sue upon or otherwise collect,
     extend the time of payment of, compromise or settle for cash, credit or
     upon any terms any of the Receivables or any other securities, instruments
     or insurance applicable thereto and/or release any obligor thereof. Agent
     is authorized and empowered to accept following the occurrence and during
     the continuance of an Event of Default or Default the return of the goods
     represented by any of the Receivables, without notice to or consent by
     Borrower, all without discharging or in any way affecting Borrower's
     liability hereunder.

          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds
     of Collateral shall be deposited by Borrower into a lockbox account,
     dominion account or such other "blocked account" ("Blocked Accounts") as
     Agent may require pursuant to an arrangement with such bank as may be
     selected by Borrower and be acceptable to Agent. Borrower shall issue to
     any such bank, an irrevocable letter of instruction directing said bank to
     transfer such funds so deposited to Agent, either to any account maintained
     by Agent at said bank or by wire transfer to appropriate account(s) of
     Agent. All funds deposited in such Blocked Accounts shall immediately
     become the property of Agent and Borrower shall obtain the agreement by
     such bank to waive any offset rights against the funds so deposited.
     Neither Agent nor any Lender assumes any responsibility for such blocked
     account arrangement, including without limitation, any claim of accord and
     satisfaction or release with respect to deposits accepted by any bank
     thereunder. Alternatively, Agent may establish depository accounts
     ("Depository Accounts") in the name of Agent at a bank or banks for the
     deposit of such funds and Borrower shall deposit all proceeds of Collateral
     or cause same to be deposited, in kind, in such Depository Accounts of
     Agent in lieu of depositing same to the Blocked Accounts.


                                       38
<PAGE>
          (i) Adjustments. Borrower will not, without Agent's consent,
     compromise or adjust any material amount of the Receivables (or extend the
     time for payment thereof) or accept any material returns of merchandise or
     grant any additional discounts, allowances or credits thereon except for
     those compromises, adjustments, returns, discounts, credits and allowances
     as have been heretofore customary in the business of Borrower.

     4.16 Inventory. To the extent Inventory held for sale or lease has been
produced by Borrower, it has been and will be produced by Borrower in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder. Appraisals of the Inventory of Borrower may
be conducted by Agent, at Borrower's expense, annually or at more frequent
intervals as Agent may reasonably request.

     4.17 Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation if such violation could reasonably
be expected to have a Material Adverse Effect. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.

     4.18 Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof, except to
the extent caused as a direct result of the gross negligence or willful
misconduct of Agent or such Lender. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any of Borrower's
obligations under any contract or agreement assigned to Agent or such Lender,
and neither Agent nor any Lender shall be responsible in any way for the
performance by Borrower of any of the terms and conditions thereof.

     4.19 Environmental Matters.

          (a) Borrower shall ensure that the Real Property remains in compliance
     with all Environmental Laws and Borrower shall not place or permit to be
     placed any Hazardous Substances on any Real Property except as permitted by
     applicable law or appropriate governmental authorities.

          (b) Borrower shall establish and maintain a system to assure and
     monitor continued compliance with all applicable Environmental Laws which
     system shall include periodic reviews of such compliance.

          (c) Borrower shall (i) employ in connection with the use of the Real
     Property appropriate technology necessary to maintain compliance with any
     applicable Environmental Laws and (ii) dispose of any and all Hazardous
     Waste generated at the Real Property only at facilities and with carriers
     that maintain valid permits under RCRA and any other applicable
     Environmental Laws. Borrower shall use its best efforts to obtain
     certificates of disposal, such as hazardous waste manifest receipts, from
     all


                                       39
<PAGE>
     treatment, transport, storage or disposal facilities or operators employed
     by Borrower in connection with the transport or disposal of any Hazardous
     Waste generated at the Real Property.

          (d) In the event Borrower obtains, gives or receives notice of any
     Release or threat of Release of a reportable quantity of any Hazardous
     Substances at the Real Property (any such event being hereinafter referred
     to as a "Hazardous Discharge") or receives any notice of violation, request
     for information or notification that it is potentially responsible for
     investigation or cleanup of environmental conditions at the Real Property,
     demand letter or complaint, order, citation, or other written notice with
     regard to any Hazardous Discharge or violation of Environmental Laws
     affecting the Real Property or Borrower's interest therein (any of the
     foregoing is referred to herein as an "Environmental Complaint") from any
     Person, including any state agency responsible in whole or in part for
     environmental matters in the state in which the Real Property is located or
     the United States Environmental Protection Agency (any such person or
     entity hereinafter the "Authority"), then Borrower shall, within five (5)
     Business Days, give written notice of same to Agent detailing facts and
     circumstances of which Borrower is aware giving rise to the Hazardous
     Discharge or Environmental Complaint. Such information is to be provided to
     allow Agent to protect its security interest in the Collateral and is not
     intended to create nor shall it create any obligation upon Agent or any
     Lender with respect thereto.

          (e) Borrower shall promptly forward to Agent copies of any request for
     information, notification of potential liability, demand letter relating to
     potential responsibility with respect to the investigation or cleanup of
     Hazardous Substances at any other site owned, operated or used by Borrower
     to dispose of Hazardous Substances and shall continue to forward copies of
     correspondence between Borrower and the Authority regarding such claims to
     Agent until the claim is settled. Borrower shall promptly forward to Agent
     copies of all documents and reports concerning a Hazardous Discharge at the
     Real Property that Borrower is required to file under any Environmental
     Laws. Such information is to be provided solely to allow Agent to protect
     Agent's security interest in the Collateral.

          (f) Borrower shall respond promptly to any Hazardous Discharge or
     Environmental Complaint and take all necessary action in order to safeguard
     the health of any Person and to avoid subjecting the Collateral or the Real
     Property to any Lien. If Borrower shall fail to respond promptly to any
     Hazardous Discharge or Environmental Complaint or Borrower shall fail to
     comply with any of the requirements of any Environmental Laws, Agent on
     behalf of Lenders may, but without the obligation to do so, for the sole
     purpose of protecting Agent's interest in the Collateral: (A) give such
     notices or (B) enter onto the Real Property (or authorize third parties to
     enter onto the Real Property) and take such actions as Agent (or such third
     parties as directed by Agent) deem reasonably necessary or advisable, to
     clean up, remove, mitigate or otherwise deal with any such Hazardous
     Discharge or Environmental Complaint. All reasonable costs and expenses
     incurred by Agent and Lenders (or such third parties) in the exercise of
     any such rights, including any sums paid in connection with any judicial or
     administrative investigation or proceedings, fines and penalties, together
     with interest thereon from the


                                       40
<PAGE>
     date expended at the Default Rate for Domestic Rate Loans constituting
     Revolving Advances shall be paid upon demand by Borrower, and until paid
     shall be added to and become a part of the Obligations secured by the Liens
     created by the terms of this Agreement or any other agreement between
     Agent, any Lender and Borrower.

          (g) Promptly upon the written request of Agent from time to time
     (which written request shall briefly describe the reason such request is
     being made by Agent), Borrower shall provide Agent, at Borrower's expense,
     with an environmental site assessment or environmental audit report
     prepared by an environmental engineering firm acceptable in the reasonable
     opinion of Agent, to assess with a reasonable degree of certainty the
     existence of a Hazardous Discharge and the potential costs in connection
     with abatement, cleanup and removal of any Hazardous Substances found on,
     under, at or within the Real Property. Any report or investigation of such
     Hazardous Discharge proposed and acceptable to an appropriate Authority
     that is charged to oversee the clean-up of such Hazardous Discharge shall
     be acceptable to Agent. If such estimates, individually or in the
     aggregate, exceed $100,000, Agent shall have the right to require Borrower
     to post a bond, letter of credit or other security reasonably satisfactory
     to Agent to secure payment of these costs and expenses.

          (h) Borrower shall defend and indemnify Agent and Lenders and hold
     Agent, Lenders and their respective employees, agents, directors and
     officers harmless from and against all loss, liability, damage and expense,
     claims, costs, fines and penalties, including attorney's fees, suffered or
     incurred by Agent or Lenders under or on account of any Environmental Laws,
     including, without limitation, the assertion of any Lien thereunder, with
     respect to any Hazardous Discharge, the presence of any Hazardous
     Substances affecting the Real Property, whether or not the same originates
     or emerges from the Real Property or any contiguous real estate, including
     any loss of value of the Real Property as a result of the foregoing except
     to the extent such loss, liability, damage and expense is attributable to
     any Hazardous Discharge resulting from actions on the part of Agent or any
     Lender. Borrower's obligations under this Section 4.19 shall arise upon the
     discovery of the presence of any Hazardous Substances at the Real Property,
     whether or not any federal, state, or local environmental agency has taken
     or threatened any action in connection with the presence of any Hazardous
     Substances. Borrower's obligation and the indemnifications hereunder shall
     survive the termination of this Agreement.

          (i) For purposes of Sections 4.19 and 5.7, all references to Real
     Property shall be deemed to include all of Borrower's right, title and
     interest in and to its owned and leased premises.

     4.20 Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.

V.   REPRESENTATIONS AND WARRANTIES.

     Borrower represents and warrants as follows:


                                       41
<PAGE>
     5.1 Authority. Borrower has full power, authority and legal right to enter
into this Agreement and the Other Documents and to perform all its respective
Obligations hereunder and thereunder. This Agreement and the Other Documents
constitute the legal, valid and binding obligation of Borrower enforceable in
accordance with their terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally. The execution, delivery and performance of this
Agreement and of the Other Documents (a) are within Borrower's corporate powers,
have been duly authorized, are not in contravention of law or the terms of
Borrower's by-laws, articles of incorporation or other applicable documents
relating to Borrower's formation or to the conduct of Borrower's business or of
any material agreement or undertaking to which Borrower is a party or by which
Borrower is bound, and (b) will not conflict with nor result in any breach in
any of the provisions of or constitute a default under or result in the creation
of any Lien except Permitted Encumbrances upon any asset of Borrower under the
provisions of any agreement, charter document, instrument, by-law, or other
instrument to which Borrower is a party or by which it or its property may be
bound.

     5.2 Formation and Qualification.

          (a) Borrower is duly incorporated and in good standing under the laws
     of the state listed on Schedule 5.2(a) and is qualified to do business and
     is in good standing in the states listed on Schedule 5.2(a) which
     constitute all states in which qualification and good standing are
     necessary for Borrower to conduct its business and own its property and
     where the failure to so qualify could reasonably be expected to have a
     Material Adverse Effect. Borrower has delivered to Agent true and complete
     copies of its articles of incorporation and by-laws and will promptly
     notify Agent of any amendment or changes thereto.

          (b) The only Subsidiaries of Borrower are listed on Schedule 5.2(b).

     5.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement and the Other Documents shall
be true at the time of Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.

     5.4 Tax Returns. Borrower's federal tax identification number is set forth
on Schedule 5.4. Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable. Federal, state and
local income tax returns of Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and satisfied for
all fiscal years prior to and including the fiscal year ending December 31,
1996. The provision for taxes on the books of Borrower is adequate for all years
not closed by applicable statutes, and for its current fiscal year, and Borrower
has no knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.

     5.5 Financial Statements.


                                       42
<PAGE>
          (a) The pro forma balance sheet of Borrower (the "Pro Forma Balance
     Sheet") furnished to Agent on the Closing Date reflects the consummation of
     the transactions contemplated by the UDAG Loan Documents, the Wisconsin
     Business Bank Loan Documents, the CDBG Loan Documents, the Sale/Service
     Documents and under this Agreement (the "Transactions ") and is accurate,
     complete and correct and fairly reflects the financial condition of
     Borrower as of the Closing Date after giving effect to the Transactions,
     and has been prepared in accordance with GAAP, consistently applied. The
     Pro Forma Balance Sheet has been certified as accurate, complete and
     correct in all material respects by the President or the Chief Financial
     Officer of Borrower. All financial statements referred to in this
     subsection 5.5(a), including the related schedules and notes thereto, have
     been prepared, in accordance with GAAP, except as may be disclosed in such
     financial statements.

          (b) The twelve-month cash flow projections of Borrower and its
     projected balance sheets as of the Closing Date, copies of which are
     annexed hereto as Exhibit 5.5(b) (the "Projections ") were prepared by the
     Chief Financial Officer of Borrower, are based on underlying assumptions
     which provide a reasonable basis for the projections contained therein and
     reflect Borrower's judgment based on present circumstances of the most
     likely set of conditions and course of action for the projected period. The
     cash flow Projections together with the Pro Forma Balance Sheet, are
     referred to as the "Pro Forma Financial Statements".

          (c) The consolidated and consolidating balance sheets of Borrower, its
     Subsidiaries and such other Persons described therein (including the
     accounts of all Subsidiaries for the respective periods during which a
     subsidiary relationship existed) as of December 31, 2000, and the related
     statements of income, changes in stockholder's equity, and changes in cash
     flow for the period ended on such date, all accompanied by reports thereon
     containing opinions without qualification (except as noted therein) by
     independent certified public accountants, copies of which have been
     delivered to Agent, have been prepared in accordance with GAAP,
     consistently applied (except for changes in application in which such
     accountants concur) and present fairly the financial position of Borrower
     and its Subsidiaries at such date and the results of their operations for
     such period. Since September 30, 2001 there has been no change in the
     condition, financial or otherwise, of Borrower or its Subsidiaries as shown
     on the consolidated balance sheet as of such date set forth in Borrower's
     most recent Form 10-Q and no change in the aggregate value of machinery,
     equipment and Real Property owned by Borrower and its Subsidiaries, except
     changes in the ordinary course of business and changes resulting from the
     transactions provided for in the Sale/Service Documents, none of which
     individually or in the aggregate has been materially adverse.

     5.6 Corporate Name. Except as set forth on Schedule 5.6, Borrower has not
been known by any other corporate name in the past five years and does not sell
Inventory under any other name, nor has Borrower been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person during the preceding five (5) years.

     5.7 O.S.H.A. and Environmental Compliance.


                                       43
<PAGE>
          (a) Except as set forth on Schedule 5.7, Borrower has duly complied in
     all material respects with, and its facilities, business, assets, property,
     leaseholds and Equipment are in compliance in all material respects with,
     the provisions of the Federal Occupational Safety and Health Act, the
     Environmental Protection Act, RCRA and all other Environmental Laws; there
     are no outstanding citations, notices or orders of non-compliance issued to
     Borrower or relating to its business, assets, property, leaseholds or
     Equipment under any such laws, rules or regulations.

          (b) Borrower has been issued all required federal, state and local
     licenses, certificates or permits relating to all applicable Environmental
     Laws necessary for the normal conduct of its business.

          (c) Except as set forth on Schedule 5.7, (i) there are no visible
     signs of releases, spills, discharges, leaks or disposal (collectively
     referred to as "Releases") of Hazardous Substances at, upon, under or
     within any Real Property or any premises leased by Borrower; (ii) there are
     no underground storage tanks or polychlorinated biphenyls on the Real
     Property or any premises leased by Borrower; (iii) neither the Real
     Property nor any premises leased by Borrower has ever been used as a
     treatment, storage or disposal facility of Hazardous Waste; and (iv) no
     Hazardous Substances are present on the Real Property or any premises
     leased by Borrower, excepting such quantities as are handled in accordance
     with all applicable manufacturer's instructions and governmental
     regulations and in proper storage containers and as are necessary for the
     operation of the commercial business of Borrower or of its tenants.

     5.8 Solvency; No Litigation, Violation, Indebtedness or Default.

          (a) After giving effect to the Transactions, Borrower will be solvent,
     able to pay its debts as they mature, will have capital sufficient to carry
     on its business and all businesses in which it is about to engage, and (i)
     as of the Closing Date, the fair present saleable value of its assets,
     calculated on a going concern basis, is in excess of the amount of its
     liabilities and (ii) subsequent to the Closing Date, the fair saleable
     value of its assets (calculated on a going concern basis) will be in excess
     of the amount of its liabilities.

          (b) Except as disclosed in Schedule 5.8(b), Borrower has no (i)
     pending or threatened litigation, arbitration, actions or proceedings which
     could reasonably be expected to have a Material Adverse Effect, and (ii)
     liabilities or indebtedness for borrowed money other than the Obligations,
     the UDAG Loan, the Wisconsin Business Bank Loan and the CDBG Loan.

          (c) Borrower is not in violation of any applicable statute, regulation
     or ordinance in any respect which could reasonably be expected to have a
     Material Adverse Effect, nor is Borrower in violation of any order of any
     court, governmental authority or arbitration board or tribunal.

          (d) Neither Borrower nor any member of the Controlled Group maintains
     or contributes to any Plan other than those listed on Schedule 5.8(d)
     hereto.


                                       44
<PAGE>
     Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
     "accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA
     and Section 412(a) of the Code, whether or not waived, and Borrower and
     each member of the Controlled Group has met all applicable minimum funding
     requirements under Section 302 of ERISA in respect of each Plan, (ii) each
     Plan which is intended to be a qualified plan under Section 401(a) of the
     Code as currently in effect has been determined by the Internal Revenue
     Service to be qualified under Section 401(a) of the Code and the trust
     related thereto is exempt from federal income tax under Section 501(a) of
     the Code, (iii) neither Borrower nor any member of the Controlled Group has
     incurred any liability to the PBGC other than for the payment of premiums,
     and there are no premium payments which have become due which are unpaid,
     (iv) no Plan has been terminated by the plan administrator thereof nor by
     the PBGC, and there is no occurrence which would cause the PBGC to
     institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
     this time, the current value of the assets of each Plan exceeds the present
     value of the accrued benefits and other liabilities of such Plan and
     neither Borrower nor any member of the Controlled Group knows of any facts
     or circumstances which would materially change the value of such assets and
     accrued benefits and other liabilities, (vi) neither Borrower nor any
     member of the Controlled Group has breached any of the responsibilities,
     obligations or duties imposed on it by ERISA with respect to any Plan,
     (vii) neither Borrower nor any member of a Controlled Group has incurred
     any liability for any excise tax arising under Section 4972 or 4980B of the
     Code, and no fact exists which could give rise to any such liability,
     (viii) neither Borrower nor any member of the Controlled Group nor any
     fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited
     transaction" described in Section 406 of the ERISA or Section 4975 of the
     Code nor taken any action which would constitute or result in a Termination
     Event with respect to any such Plan which is subject to ERISA, (ix)
     Borrower and each member of the Controlled Group has made all contributions
     due and payable with respect to each Plan, (x) there exists no event
     described in Section 4043(b) of ERISA, for which the thirty (30) day notice
     period contained in 29 CFRss.2615.3 has not been waived, (xi) neither
     Borrower nor any member of the Controlled Group has any fiduciary
     responsibility for investments with respect to any plan existing for the
     benefit of persons other than employees or former employees of Borrower and
     any member of the Controlled Group, and (xii) neither Borrower nor any
     member of the Controlled Group has withdrawn, completely or partially, from
     any Multiemployer Plan so as to incur liability under the Multiemployer
     Pension Plan Amendments Act of 1980.

     5.9 Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower which
are necessary or desirable for the conduct of Borrower's business are set forth
on Schedule 5.9 (as from time to time supplemented by Borrower), are valid and
have been duly registered or filed with all appropriate governmental authorities
and constitute all of the intellectual property rights which are necessary or
desirable for the conduct of its business; there is no objection to or pending
challenge to the validity of any such patent, trademark, copyright, design
right, tradename, trade secret or license and Borrower is not aware of any
grounds for any challenge, except as set forth in Schedule 5.9 hereto (as in
effect on the Closing Date). Each patent, patent application, patent license,
trademark, trademark application,


                                       45
<PAGE>
trademark license, service mark, service mark application, service mark license,
design right, copyright, copyright application and copyright license owned or
held by Borrower which are necessary or desirable for the conduct of Borrower's
business and all trade secrets used by Borrower consist of original material or
property developed by Borrower or was lawfully acquired by Borrower from the
proper and lawful owner thereof. Each of such items has been maintained so as to
preserve the value thereof from the date of creation or acquisition thereof to
the extent necessary or desirable for the conduct of Borrower's business. With
respect to all software used by Borrower to the extent necessary or desirable
for the conduct of Borrower's business, Borrower is in possession of all source
and object codes related to each piece of software or is the beneficiary of a
source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto (as from time to time supplemented by Borrower).

     5.10 Licenses and Permits. Except as set forth in Schedule 5.10, Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any applicable federal, state,
provincial or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect.

     5.11 Default of Indebtedness. Borrower is not in default in the payment of
the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.

     5.12 No Default. Borrower is not in default in the payment or performance
of any of its contractual obligations where such default could be reasonably
expected to result in a Material Adverse Effect and no Default has occurred.

     5.13 No Burdensome Restrictions. Borrower is not party to any contract or
agreement the performance of which could have a Material Adverse Effect.
Borrower has not agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.

     5.14 No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower's employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.

     5.15 Margin Regulations. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.


                                       46
<PAGE>
     5.16 Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

     5.17 Disclosure. No representation or warranty made by Borrower in this
Agreement, the UDAG Loan Documents, the Wisconsin Business Bank Loan Documents
or the CDBG Loan Documents, or in any financial statement, report, certificate
or any other document furnished in connection herewith or therewith contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower after reasonable investigation which Borrower has not
disclosed to Agent in writing with respect to the transactions contemplated by
the UDAG Loan Documents, the Wisconsin Business Bank Loan Documents, the CDBG
Loan Documents, the Sale/Service Documents or this Agreement which could
reasonably be expected to have a Material Adverse Effect.

     5.18 Delivery of CDBG Loan Documents, UDAG Loan Documents, Wisconsin
Business Bank Loan Documents and Sale/Service Documents. Agent has received
complete copies of the CDBG Loan Documents, the UDAG Loan Documents, the
Wisconsin Business Bank Loan Documents and the Sale/Service Documents (including
all exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto, if any) and all amendments thereto, waivers relating thereto
and other side letters or agreements affecting the terms thereof. None of such
documents and agreements has been amended or supplemented, nor have any of the
provisions thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to Agent.

     5.19 Swaps. Borrower is not a party to, nor will it be a party to, any swap
agreement whereby Borrower has agreed or will agree to swap interest rates or
currencies unless same provides that damages upon termination following an event
of default thereunder are payable on an unlimited "two-way basis" without regard
to fault on the part of either party.

     5.20 Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to permit, or would in any way prevent, the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

     5.21 Application of Certain Laws and Regulations. Neither Borrower nor any
Affiliate of Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.

     5.22 Business and Property of Borrower. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than manufacturing,
printing and conversion of paper products and activities necessary to conduct
the foregoing. On the Closing Date, Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of Borrower.


                                       47
<PAGE>
     5.23 Section 20 Subsidiaries. Borrower does not intend to use and shall not
use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.

VI.  AFFIRMATIVE COVENANTS.

     Borrower shall, until payment in full of the Obligations and termination of
this Agreement:

     6.1 Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrower's Account for all such fees and expenses.

     6.2 Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right necessary or desirable for the conduct of Borrower's business
included in the Collateral; (b) keep in full force and effect its existence and
comply in all material respects with the laws and regulations governing the
conduct of its business where the failure to do so could reasonably be expected
to have a Material Adverse Effect; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof where the failure to do so could reasonably be expected to
have a Material Adverse Effect.

     6.3 Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower which could reasonably be expected to have a
Material Adverse Effect.

     6.4 Government Receivables. With respect to any Receivable arising out of
contracts between Borrower and the United States, any state or any department,
agency or instrumentality of any of them which Borrower desires to have
considered as an Eligible Receivable or which Agent specifies in writing to
Borrower, take all steps necessary to protect Agent's interest in the Collateral
under the Federal Assignment of Claims Act or other applicable state or local
statutes or ordinances and deliver to Agent, appropriately endorsed, any
instrument or chattel paper connected therewith.

     6.5 Fixed Charge Coverage Ratio. Cause to be maintained at the end of each
calendar quarter commencing with the calendar quarter ending March 31, 2002, a
Fixed Charge Coverage Ratio of not less than 1.0 to 1.0, calculated for the
twelve immediately preceding months ending as of the date of determination.


                                       48
<PAGE>
     6.6 Tangible Net Worth. Maintain at all times a Tangible Net Worth of not
less than the sum of $17,500,000, plus (i) an amount equal to 25% of Borrower's
consolidated net income (without deduction for any net loss) as of the end of
each fiscal quarter from and after December 31, 2001 through and including
December 31, 2002, and (ii) an amount equal to 50% of Borrower's consolidated
net income (without deduction for any net loss) as of the end of each fiscal
quarter from and after December 31, 2002.

     6.7 Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request in its discretion
exercised in a commercially reasonable manner, in order that the full intent of
this Agreement may be carried into effect.

     6.8 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.

     6.9 Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).

VII. NEGATIVE COVENANTS.

     Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:

     7.1 Merger, Consolidation, Acquisition and Sale of Assets.

          (a) Enter into any merger, consolidation or other reorganization with
     or into any other Person or acquire all or a substantial portion of the
     assets or stock of any Person or permit any other Person to consolidate
     with or merge with it; provided, however, that any Subsidiary may merge
     with and into Borrower so long as Borrower is the surviving entity.

          (b) Sell, lease, transfer or otherwise dispose of any of its
     properties or assets, except in the ordinary course of its business and
     except as provided in Section 4.3.

     7.2 Creation of Liens. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.


                                       49
<PAGE>
     7.3 Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3 and (b) the endorsement of checks in the
ordinary course of business.

     7.4 Investments. Purchase or acquire obligations or stock of, or any other
interest in, any Person (not including demand deposit accounts with financial
institutions), except (a) obligations issued or guaranteed by the United States
of America or any agency thereof, (b) commercial paper with maturities of not
more than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (c) certificates of time deposit and bankers' acceptances
having maturities of not more than 180 days and repurchase agreements backed by
United States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency, (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof and (e) a certificate of deposit issued by Harris Trust and Savings Bank
in the principal amount of $164,305 and held by Harris Trust and Savings Bank as
collateral security for Borrower's repayment obligations in respect of letter of
credit #37255 outstanding on the Closing Date.

     7.5 Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $100,000 at any time outstanding.

     7.6 Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount
for all Borrower in excess of $3,000,000.

     7.7 Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower.

     7.8 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; (ii)
Indebtedness incurred for Capital Expenditures permitted under Section 7.6
hereof; (iii) Indebtedness due under the CDBG Loan Documents, Indebtedness due
under the UDAG Loan Documents and Indebtedness due under the Wisconsin Business
Bank Loan Documents, each as in effect on the Closing Date; (iv) hedge
agreements with suppliers entered into in the ordinary course of business and in
accordance with historical practices of Borrower.

     7.9 Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or


                                       50
<PAGE>
property which are useful in, necessary for and are to be used in its business
as presently conducted.

     7.10 Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions in the ordinary
course of business, on an arm's-length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate.

     7.11 Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $1,200,000 in any one fiscal year in the aggregate for
Borrower.

     7.12 Subsidiaries.

          (a) Form any Subsidiary unless (i) all of the equity interests in such
     Subsidiary are subject to a first priority security interest in favor of
     Agent pursuant to the Subsidiary Pledge and Security Agreement and (ii)
     Agent shall have received all documents, including legal opinions, it may
     reasonably require to establish compliance with each of the foregoing
     conditions.

          (b) Enter into any partnership, joint venture or similar arrangement.

     7.13 Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.

     7.14 Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's business as conducted on
the date of this Agreement.

     7.15 Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any material term or provision of its Articles of Incorporation or By-Laws
unless required by law.

     7.16 Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member of the Controlled
Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Agent of the


                                       51
<PAGE>
occurrence of any Termination Event, (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or the
Code or other applicable laws in respect of any Plan, (ix) fail to meet, or
permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.

     7.17 Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of Borrower.

     7.18 Other Agreements. Without the prior written consent of Agent, enter
into any amendment, waiver or modification of the CDBG Loan Documents, the UDAG
Loan Documents, the Wisconsin Business Bank Loan Documents, the Sale/Service
Documents or any related agreements if the effect of any such amendment, waiver
or modification is to: (a) increase the interest rate on the Indebtedness
arising under any such document; (b) increase the amount of any principal
installment or any fee payable in respect of the Indebtedness arising under any
such document; (c) change the dates upon which payments of principal or interest
are due on the Indebtedness arising under any such document other than to extend
such dates; (d) change any default or event of default other than to delete or
make less restrictive any default provision therein, or add any covenant with
respect to the Indebtedness arising under any such document; (e) change the
redemption or prepayment provisions of the Indebtedness arising under any such
document other than to extend the dates therefor or to reduce the premiums
payable in connection therewith; (f) grant any additional security or collateral
to secure payment of the Indebtedness arising under any such document; or (g)
change or amend any other term if such change or amendment would materially
increase the obligations of Borrower thereunder or confer additional material
rights on the holder of the Indebtedness arising under any such document in a
manner adverse to Borrower, Agent or any Lender.

VIII. CONDITIONS PRECEDENT.

     8.1 Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:

          (a) Note. Agent shall have received the Note duly executed and
     delivered by an authorized officer of Borrower;

          (b) Filings, Registrations and Recordings. Each document (including,
     without limitation, any Uniform Commercial Code financing statement)
     required by this Agreement, any related agreement or under law or
     reasonably requested by the Agent to be filed, registered or recorded in
     order to create, in favor of Agent, a perfected security interest in or
     lien upon the Collateral shall have been properly filed, registered or
     recorded in each jurisdiction in which the filing, registration or
     recordation thereof is so required or requested, and Agent shall have
     received an acknowledgment copy, or other evidence satisfactory to it, of
     each such filing,


                                       52
<PAGE>
     registration or recordation and satisfactory evidence of the payment of any
     necessary fee, tax or expense relating thereto;

          (c) Corporate Proceedings of Borrower. Agent shall have received a
     copy of the resolutions in form and substance reasonably satisfactory to
     Agent, of the Board of Directors of Borrower authorizing (i) the execution,
     delivery and performance of this Agreement, the Note and any related
     agreements (collectively the "Documents") and (ii) the granting by Borrower
     of the security interests in and liens upon the Collateral in each case
     certified by the Secretary or an Assistant Secretary of Borrower as of the
     Closing Date; and, such certificate shall state that the resolutions
     thereby certified have not been amended, modified, revoked or rescinded as
     of the date of such certificate;

          (d) Incumbency Certificates of Borrower. Agent shall have received a
     certificate of the Secretary or an Assistant Secretary of Borrower, dated
     the Closing Date, as to the incumbency and signature of the officers of
     Borrower executing this Agreement, the Other Documents, any certificate or
     other documents to be delivered by it pursuant hereto, together with
     evidence of the incumbency of such Secretary or Assistant Secretary;

          (e) Certificates. Agent shall have received a copy of the Articles of
     Incorporation of Borrower, and all amendments thereto, certified by the
     Secretary of State or other appropriate official of its jurisdiction of
     incorporation together with copies of the By-Laws of Borrower and all
     agreements of Borrower's shareholders certified as accurate and complete by
     the Secretary of Borrower;

          (f) Good Standing Certificates. Agent shall have received good
     standing certificates for Borrower dated not more than 30 days prior to the
     Closing Date, issued by the Secretary of State or other appropriate
     official of Borrower's jurisdiction of incorporation and each jurisdiction
     where the conduct of Borrower's business activities or the ownership of its
     properties necessitates qualification;

          (g) Legal Opinion. Agent shall have received the executed legal
     opinion of Foley & Lardner in form and substance satisfactory to Agent
     which shall cover such matters incident to the transactions contemplated by
     this Agreement, the Note, the Other Documents, and related agreements as
     Agent may reasonably require and Borrower hereby authorizes and directs
     such counsel to deliver such opinions to Agent and Lenders;

          (h) No Litigation. (i) No litigation, investigation or proceeding
     before or by any arbitrator or Governmental Body shall be continuing or
     threatened against Borrower or against the officers or directors of
     Borrower (A) in connection with this Agreement, the Other Documents or any
     of the transactions contemplated thereby and which, in the reasonable
     opinion of Agent, is deemed material or (B) which could, in the reasonable
     opinion of Agent, have a Material Adverse Effect; and (ii) no injunction,
     writ, restraining order or other order of any nature materially adverse to
     Borrower or the conduct of its business or inconsistent with the due
     consummation of the Transactions shall have been issued by any Governmental
     Body;

          (i) Financial Condition Certificates. Agent shall have received an
     executed Financial Condition Certificate in the form of Exhibit 8.1(i).


                                       53
<PAGE>
          (j) Collateral Examination. Agent shall have completed Collateral
     examinations and received appraisals, the results of which shall be
     satisfactory in form and substance to Lenders, of the Receivables,
     Inventory, and General Intangibles of Borrower and all books and records in
     connection therewith;

          (k) Fees. Agent shall have received all fees payable to Agent and
     Lenders on or prior to the Closing Date hereunder, including, without
     limitation, pursuant to Article III hereof;

          (l) Pro Forma Financial Statements. Agent shall have received a copy
     of the Pro Forma Financial Statements which shall be satisfactory in all
     respects to Lenders;

          (m) CDBG Loan Documents, UDAG Loan Documents and Wisconsin Business
     Bank Loan Documents. Agent shall have received final executed copies of the
     CDBG Loan Documents, the UDAG Loan Documents and the Wisconsin Business
     Bank Loan Documents and all related agreements, documents and instruments
     as in effect on the Closing Date and the transactions contemplated by such
     documentation shall be consummated prior to the making of the initial
     Advance including, without limitation, the receipt by Borrower of the
     proceeds of the UDAG Loan in the principal amount of $500,000 (in addition
     to amounts previously disbursed to Borrower) and the proceeds of the
     Wisconsin Business Bank Loan in the principal amount requested by Borrower
     on the Closing Date (from the total loan availability of $5,000,000);

          (n) Mortgagee Waivers. Agent shall have received mortgagee waivers
     from the City of Peshtigo, Wisconsin and the Wisconsin Business Bank with
     respect to the Real Estate in form and content acceptable to Agent.

          (o) Equipment Access and Use Agreement. Agent and the Wisconsin
     Business Bank and the City of Peshtigo, Wisconsin shall have entered into
     Equipment Access and Use Agreements granting the Agent the right to use the
     Equipment for up to 90 days following the occurrence of an Event of Default
     and in form and content acceptable to Agent.

          (p) Sewage Treatment Facility Sale/Service. Agent shall have received
     final executed copies of the Sale/Service Documents and all related
     agreements, documents and instruments as in effect on the Closing Date and
     shall have received a side letter from the City of Peshtigo, Wisconsin
     committing to disburse to Borrower cash proceeds from the transactions
     contemplated by the Sale/Service Documents in the amount of $1,250,000 on
     or before January 31, 2002.

          (q) Insurance. Agent shall have received in form and substance
     satisfactory to Agent, certified copies of Borrower's casualty insurance
     policies, together with loss payable endorsements on Agent's standard form
     of loss payee endorsement naming Agent as loss payee, and certified copies
     of Borrower's liability insurance policies, together with endorsements
     naming Agent as a co-insured;

          (r) Payment Instructions. Agent shall have received written
     instructions from Borrower directing the application of proceeds of the
     initial Advances made pursuant to this Agreement;


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<PAGE>
          (s) Blocked Accounts. Agent shall have received duly executed
     agreements establishing the Blocked Accounts or Depository Accounts with
     financial institutions acceptable to Agent for the collection or servicing
     of the Receivables and proceeds of the Collateral;

          (t) Consents. Agent shall have received any and all Consents necessary
     to permit the effectuation of the transactions contemplated by this
     Agreement and the Other Documents; and, Agent shall have received such
     Consents and waivers of such third parties as might assert claims with
     respect to the Collateral, as Agent and its counsel shall deem necessary;

          (u) No Adverse Material Change. (i) since September 30, 2001, there
     shall not have occurred any event, condition or state of facts which could
     reasonably be expected to have a Material Adverse Effect and (ii) no
     representations made or information supplied to Agent or Lenders shall have
     been proven to be inaccurate or misleading in any material respect;

          (v) Leasehold Agreements. Agent shall have received landlord,
     mortgagee or warehouseman agreements satisfactory to Agent with respect to
     all premises leased by Borrower at which Inventory and books and records
     are located;

          (w) Subsidiary Pledge and Security Agreement. Agent shall have
     received an executed Subsidiary Pledge and Security Agreement, in form and
     content acceptable to Agent;

          (x) Intellectual Property Security Agreements. Agent shall have
     received executed copies of the Intellectual Property Security Agreements,
     in form and content acceptable to Agent;

          (y) Closing Certificate. Agent shall have received a closing
     certificate signed by the Chief Financial Officer of Borrower dated as of
     the date hereof, stating that (i) all representations and warranties set
     forth in this Agreement and the Other Documents are true and correct on and
     as of such date, (ii) Borrower is on such date in compliance with all the
     terms and provisions set forth in this Agreement and the Other Documents
     and (iii) on such date no Default or Event of Default has occurred or is
     continuing;

          (z) Borrowing Base. Agent shall have received evidence from Borrower
     that the aggregate amount of Eligible Receivables and Eligible Inventory is
     sufficient in value and amount to support Advances in the amount requested
     by Borrower on the Closing Date;

          (aa) Undrawn Availability. After giving effect to the initial Advances
     hereunder, Borrower shall have Undrawn Availability of at least $1,500,000;
     and

          (bb) Other. All corporate and other proceedings, and all documents,
     instruments and other legal matters in connection with the Transactions
     shall be satisfactory in form and substance to Agent and its counsel.


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<PAGE>
     8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:

          (a) Representations and Warranties. Each of the representations and
     warranties made by Borrower in or pursuant to this Agreement and any
     related agreements to which it is a party, and each of the representations
     and warranties contained in any certificate, document or financial or other
     statement furnished at any time under or in connection with this Agreement
     or any related agreement shall be true and correct in all material respects
     on and as of such date as if made on and as of such date, except to the
     extent specifically relating to an earlier date;

          (b) No Default. No Event of Default or Default shall have occurred and
     be continuing on such date, or would exist after giving effect to the
     Advances requested to be made, on such date and, in the case of the initial
     Advance, after giving effect to the consummation of the transactions
     contemplated by UDAG Loan Documents, the Wisconsin Business Bank Loan
     Documents and the Sale/Service Documents; provided, however that Agent, in
     its sole discretion, may continue to make Advances notwithstanding the
     existence of an Event of Default or Default and that any Advances so made
     shall not be deemed a waiver of any such Event of Default or Default; and

          (b) Maximum Advances. In the case of any Advances requested to be
     made, after giving effect thereto, the aggregate Advances shall not exceed
     the maximum amount of Advances permitted under Section 2.1 hereof. Each
     request for an Advance by Borrower hereunder shall constitute a
     representation and warranty by Borrower as of the date of such Advance that
     the conditions contained in this subsection shall have been satisfied.

IX.  INFORMATION AS TO BORROWER.

     Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

     9.1 Disclosure of Material Matters. Promptly upon learning thereof, report
to Agent all matters materially and adversely affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, Borrower's reclamation or repossession of, or the return to
Borrower of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor.

     9.2 Schedules. Deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) accounts receivable agings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports and
(d) a borrowing base certificate in form and substance satisfactory to Agent
(which shall be calculated as of the last day of the prior month and which shall
not be binding upon Agent or restrictive of Agent's rights under this
Agreement). In addition, Borrower will deliver to Agent at such intervals as
Agent may require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv)


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<PAGE>
such further schedules, documents and/or information regarding the Collateral as
Agent may require including, without limitation, trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder. The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by Borrower and delivered to Agent from time to time solely for Agent's
convenience in maintaining records of the Collateral, and Borrower's failure to
deliver any of such items to Agent shall not affect, terminate, modify or
otherwise limit Agent's Lien with respect to the Collateral.

     9.3 Environmental Reports. Furnish Agent, concurrently with the delivery of
the financial statements referred to in Sections 9.7 and 9.8, with a certificate
signed by the President or the Chief Financial Officer of Borrower stating, to
the best of his knowledge, that Borrower is in compliance in all material
respects with all federal, state and local laws relating to environmental
protection and control and occupational safety and health. To the extent
Borrower is not in compliance with the foregoing laws, the certificate shall set
forth with specificity all areas of non-compliance and the proposed action
Borrower will implement in order to achieve full compliance.

     9.4 Litigation. Promptly notify Agent in writing of any litigation, suit or
administrative proceeding affecting Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect.

     9.5 Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the UDAG Loan Documents or the Wisconsin Business Bank Loan Documents or
the CDBG Loan Documents; (c) any event which with the giving of notice or lapse
of time, or both, would constitute an event of default under the UDAG Loan
Documents or the Wisconsin Business Bank Loan Documents or the CDBG Loan
Documents; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrower as of the date of such statements;
(e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject Borrower to a tax imposed by Section 4971 of the
Code; (f) each and every default by Borrower which might result in the
acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (g) any other development
in the business or affairs of Borrower which could reasonably be expected to
have a Material Adverse Effect; in each case describing the nature thereof and
the action Borrower propose to take with respect thereto.

     9.6 Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them.


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<PAGE>
     9.7 Annual Financial Statements. Furnish Agent within ninety-five (95) days
after the end of each fiscal year of Borrower, financial statements of Borrower
and its Subsidiaries including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by an independent certified public accounting firm selected by
Borrower and satisfactory to Agent (the "Accountants"). In addition, the reports
shall be accompanied by a certificate of Borrower's Chief Financial Officer
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower with
respect to such event, and such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.

     9.8 Quarterly Financial Statements. Furnish Agent within fifty (50) days
after the end of each fiscal quarter, an unaudited balance sheet of Borrower and
unaudited statements of income and stockholders' equity and cash flow of
Borrower reflecting results of operations from the beginning of the fiscal year
to the end of such quarter and for such quarter, prepared on a basis consistent
with prior practices and complete and correct in all material respects, subject
to normal and recurring year end adjustments that individually and in the
aggregate are not material to Borrower's business. The reports shall be
accompanied by a certificate signed by the Chief Financial Officer of Borrower,
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower with
respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.

     9.9 Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Borrower and
unaudited statements of income and stockholders' equity and cash flow of
Borrower reflecting results of operations from the beginning of the fiscal year
to the end of such month and for such month, prepared on a basis consistent with
prior practices and complete and correct in all material respects, subject to
normal and recurring year end adjustments that individually and in the aggregate
are not material to Borrower's business. The reports shall be accompanied by a
certificate of Borrower's Chief Financial Officer, which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event and,
such certificate shall have appended thereto calculations which set forth
Borrower's compliance with the requirements or restrictions imposed by Sections
6.5, 6.6, 7.6 and 7.11 hereof.

     9.10 Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all notices, reports, statements, certificates
and similar items sent or received pursuant to the UDAG Loan


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<PAGE>
Documents, the Wisconsin Business Bank Loan Documents and the CDBG Loan
Documents and not otherwise provided hereunder.

     9.11 Additional Information. Furnish Agent with such additional information
as Agent shall reasonably request in order to enable Agent to determine whether
the terms, covenants, provisions and conditions of this Agreement and the Note
have been complied with by Borrower including, without limitation and without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of Borrower's
opening of any new office or place of business or Borrower's closing of any
existing office or place of business, and (c) promptly upon Borrower's learning
thereof, notice of any labor dispute to which Borrower may become a party, any
strikes or walkouts relating to any of its plants or other facilities, and the
expiration of any labor contract to which Borrower is a party or by which
Borrower is bound.

     9.12 Projected Operating Budget. Furnish Agent, no later than thirty (30)
days after the beginning of Borrower's fiscal years commencing with fiscal year
2003, a month by month projected operating budget and cash flow of Borrower for
such fiscal year (including an income statement for each month and a balance
sheet as at the end of the last month in each fiscal quarter), such projections
to be accompanied by a certificate signed by the President or Chief Financial
Officer of Borrower to the effect that such projections have been prepared on
the basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared.

     9.13 Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.9, a written
report summarizing all material variances from budgets submitted by Borrower
pursuant to Section 9.12 and a discussion and analysis by management with
respect to such variances, all in the form currently provided to the Board of
Directors of Borrower.

     9.14 Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to Borrower by any
Governmental Body or any other Person that is material to the operation of
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by Borrower with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by Lender, and (iv)
copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to Borrower.

     9.15 ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or any member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has


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<PAGE>
occurred together with a written statement describing such transaction and the
action which Borrower or any member of the Controlled Group has taken, is taking
or proposes to take with respect thereto, (iii) a funding waiver request has
been filed with respect to any Plan together with all communications received by
Borrower or any member of the Controlled Group with respect to such request,
(iv) any increase in the benefits of any existing Plan or the establishment of
any new Plan or the commencement of contributions to any Plan to which Borrower
or any member of the Controlled Group was not previously contributing shall
occur, (v) Borrower or any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) Borrower or
any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) Borrower or any member of the Controlled Group shall
receive a notice regarding the imposition of withdrawal liability, together with
copies of each such notice; (viii) Borrower or any member of the Controlled
Group shall fail to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment or
payment; (ix) Borrower or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of
a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.

     9.16 Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.

X. EVENTS OF DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default":

     10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;

     10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;

     10.3. failure by Borrower to (i) furnish financial information when due or
when requested which is unremedied for a period of five (5) Business Days, or
(ii) permit the inspection of its books or records;

     10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of Borrower's property which is not stayed
or lifted within thirty (30) days but, in any event, not later than five (5)
Business Days prior to the date of any proposed sale of such property
thereunder;


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<PAGE>
     10.5. except as otherwise provided for in Sections 10.1 and 10.3, failure
or neglect of Borrower to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any other agreement or
arrangement, now or hereafter entered into between Borrower and Agent or any
Lender (after taking into account any grace or cure periods afforded thereby),
except for a failure or neglect of Borrower to perform, keep or observe any
term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9,
6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within 10 days from the
occurrence of such failure or neglect;

     10.6. any judgment or judgments are rendered or judgment liens filed
against Borrower or any Subsidiary for an aggregate amount in excess of $100,000
which within thirty (30) days of such rendering or filing is not either
satisfied, stayed or discharged of record;

     10.7. Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;

     10.8. Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;

     10.9. any Subsidiary of Borrower shall (i) apply for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (viii) take any action for the purpose of effecting any of the
foregoing;

     10.10. any change in Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect;

     10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest, except as expressly permitted under this
Agreement;

     10.12. any event of default shall occur under the CDBG Loan Documents, the
UDAG Loan Documents or the Wisconsin Business Bank Loan Documents which permits
the applicable lender to accelerate the indebtedness of Borrower thereunder;


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<PAGE>
     10.13. a default of the obligations of Borrower under any other agreement
to which it is a party shall occur which materially and adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;

     10.14. any Change of Control shall occur;

     10.15. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;

     10.16. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of Borrower,
the continuation of which is material to the continuation of Borrower's
business, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such license, permit, trademark, tradename or patent and such
proceedings shall not be dismissed or discharged within sixty (60) days, or (c)
schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of Borrower's business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of Borrower's business shall be revoked
or terminated and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or termination, and such revocation
or termination and non-replacement would reasonably be expected to have a
Material Adverse Effect;

     10.17. any portion of the Collateral shall be seized or taken by a
Governmental Body, or Borrower or the title and rights of Borrower in any
material portion of the Collateral shall have become the subject matter of
litigation which might, in the opinion of Agent, upon final determination,
result in impairment or loss of the security provided by this Agreement or the
Other Documents;

     10.18. the operations of Borrower's manufacturing facility are interrupted
at any time for more than 21 consecutive days, unless Borrower (or Agent) shall
(i) be entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that Borrower's per diem cash
receipts during such period is at least equal to its average per diem cash needs
for the consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if Borrower shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days;

     10.19. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect; or


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     10.20. Borrower fails to receive from the City of Peshtigo, Wisconsin cash
proceeds in the amount of $1,250,000 from the transactions contemplated by the
Sale/Service Documents on or before 5:00 p.m. Chicago time on February 28, 2002.

XI.  LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.

     11.1 Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured or waived), at the
option of Required Lenders all Obligations shall be immediately due and payable
and Lenders shall have the right to terminate this Agreement and to terminate
the obligation of Lenders to make Advances and (iii) a filing of a petition
against Borrower in any involuntary case under any state or federal bankruptcy
laws, the obligation of Lenders to make Advances hereunder shall be terminated
other than as may be required by an appropriate order of the bankruptcy court
having jurisdiction over Borrower. Upon the occurrence and during the
continuance of any Event of Default, Agent shall have the right to exercise any
and all other rights and remedies provided for herein, under the Uniform
Commercial Code and at law or equity generally, including, without limitation,
the right to foreclose the security interests granted herein and to realize upon
any Collateral by any available judicial procedure and/or to take possession of
and sell any or all of the Collateral with or without judicial process. Agent
may enter any of Borrower's premises or other premises without legal process and
without incurring liability to Borrower therefor, and Agent may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrower to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrower reasonable notification of such sale or sales,
it being agreed that in all events written notice mailed to Borrower at least
ten (10) days prior to such sale or sales is reasonable notification. At any
public sale Agent or any Lender may bid for and become the purchaser, and Agent,
any Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by Borrower. In connection with the exercise of
the foregoing remedies, Agent is granted permission to use all of Borrower's (a)
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods. The proceeds
realized from the sale of any Collateral shall be applied in the order set forth
in Section 11.5 hereof. If any deficiency shall arise, Borrower shall remain
liable to Agent and Lenders therefor.

     11.2 Agent's Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish,


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<PAGE>
subordinate, or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent's or Lenders'
rights hereunder.

     11.3 Setoff. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence of an Event of Default and during
the continuance hereunder, Agent and such Lender shall have a right to apply
Borrower's property held by Agent and such Lender to reduce the Obligations.

     11.4 Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.

     11.5 Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:

     FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of the Agent in
connection with enforcing its rights and the rights of the Lenders under this
Agreement and the Other Documents and any protective advances made by the Agent
with respect to the Collateral under or pursuant to the terms of this Document;

     SECOND, to payment of any fees owed to the Agent;

     THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of each of the
Lenders in connection with enforcing its rights under this Agreement and the
Other Documents or otherwise with respect to the Obligations owing to such
Lender;

     FOURTH, to the payment of all of the Obligations consisting of accrued fees
and interest;

     FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit);

     SIXTH, to all other Obligations which shall have become due and payable
under the Other Documents or otherwise and not repaid pursuant to clauses
"FIRST" through "FIFTH" above;

     SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata


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share (based on the proportion that the then outstanding Advances held by such
Lender bears to the aggregate then outstanding Advances) of amounts available to
be applied pursuant to clauses "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to
the extent that any amounts available for distribution pursuant to clause
"FIFTH" above are attributable to the issued but undrawn amount of outstanding
Letters of Credit, such amounts shall be held by the Agent in a cash collateral
account and applied (A) first, to reimburse the Issuer from time to time for any
drawings under such Letters of Credit and (B) then, following the expiration of
all Letters of Credit, to all other obligations of the types described in
clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 11.5.

XII. WAIVERS AND JUDICIAL PROCEEDINGS.

     12.1 Waiver of Notice. Borrower hereby waives notice of non-payment of any
of the Receivables, demand, presentment, protest and notice thereof with respect
to any and all in-struments, notice of acceptance hereof, notice of loans or
advances made, credit extended, Collateral received or delivered, or any other
action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.

     12.2 Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.

     12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

XIII. EFFECTIVE DATE AND TERMINATION.

     13.1 Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of Borrower, Agent
and each Lender, shall become effective on the date hereof and shall continue in
full force and effect until November 30, 2004 (the "Original Term") and shall
automatically be renewed for successive one-year periods ("Renewal Term(s)")
unless (i) sooner terminated as herein provided, or (ii) either Agent


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(at the direction of Required Lenders) or Borrower notifies the other party in
writing at least 90 days prior to the expiration of the Original Term or any
Renewal Term of such parties intent not to renew. Borrower may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Original Term (the date of such prepayment
hereinafter referred to as the "Early Termination Date"), Borrower shall pay to
Agent for the benefit of Lenders an early termination fee in an amount equal to
(x) $450,000 if the Early Termination Date occurs on or after the Closing Date
to and including the date immediately preceding the first anniversary of the
Closing Date, (y) $300,000 if the Early Termination Date occurs on or after the
first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, unless during such period
there is an Acquisition of Borrower, in which case the fee shall be $150,000,
and (z) $150,000 if the Early Termination Date occurs on or after the second
anniversary of the Closing Date to and including the date immediately preceding
the third anniversary of the Closing Date; provided, however, that no such early
termination fee shall be payable in the event that any such prepayment is
effected by means of a refinancing of the Obligations pursuant to a credit
facility provided by PNC Bank, National Association.

     13.2 Termination. The termination of the Agreement shall not affect
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and Lenders with
an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, Borrower waives any rights which it may have under the Uniform
Commercial Code to demand the filing of termination statements with respect to
the Collateral, and Agent shall not be required to send such termination
statements to Borrower, or to file them with any filing office, unless and until
this Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are paid or performed in full.

XIV. REGARDING AGENT.

     14.1 Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4, charges and collections (without giving effect to any collection
days) received pursuant to this


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Agreement, for the ratable benefit of Lenders. Agent may perform any of its
duties hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including without limitation,
collection of the Note) Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Documents or applicable law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.

     14.2 Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other
Documents or for any failure of Borrower to perform its obligations hereunder.
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of Borrower. The duties of Agent as respects the
Advances to Borrower shall be mechanical and administrative in nature; Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement except as expressly set forth herein.

     14.3 Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Borrower in connection with the making and the continuance of the
Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of Borrower. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of Borrower, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Note, the Other Documents or the financial
condition of Borrower, or the existence of any Event of Default or any Default.


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     Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower.

     Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.

     14.4 Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.

     14.5 Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.

     14.6 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.

     14.7 Indemnification. To the extent Agent is not reimbursed and indemnified
by Borrower, each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the Advances (or, if no Advances are outstanding,
according to its Commitment Percentage), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that, Lenders shall not be liable for any portion of
such liabilities, obligations, losses,


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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross (not mere) negligence or willful misconduct.

     14.8 Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.

     14.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 from Borrower
pursuant to the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.

     14.10 Borrower's Undertaking to Agent. Without prejudice to its obligations
to Lenders under the other provisions of this Agreement, Borrower hereby
undertakes with Agent to pay to Agent from time to time on demand all amounts
from time to time due and payable by it for the account of Agent or Lenders or
any of them pursuant to this Agreement to the extent not already paid. Any
payment made pursuant to any such demand shall pro tanto satisfy Borrower's
obligations to make payments for the account of Lenders or the relevant one or
more of them pursuant to this Agreement.

XV.  MISCELLANEOUS.

     15.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois applied to contracts to be
performed wholly within the State of Illinois. Any judicial proceeding brought
by or against Borrower with respect to any of the Obligations, this Agreement,
the Other Documents or any related agreement may be brought in any court of
competent jurisdiction in the State of Illinois, United States of America, and,
by execution and delivery of this Agreement, Borrower accepts for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Borrower hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt
requested) directed to Borrower at its address set forth in Section 15.6 and
service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against
Borrower in the courts of any other jurisdiction. Borrower waives any objection
to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum
non conveniens. Borrower, Agent and Lenders waive the right to remove any
judicial proceeding brought against such Person in any state court to any
federal court. Any judicial proceeding by Borrower against Agent or any Lender
involving, directly or indirectly, any matter or claim in any way arising out
of, related to or connected with


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this Agreement or any related agreement, shall be brought only in a federal or
state court located in the County of Cook, State of Illinois.

     15.2 Entire Understanding.

          (a) This Agreement and the documents executed concurrently herewith
     contain the entire understanding between Borrower, Agent and each Lender
     and supersedes all prior agreements and understandings, if any, relating to
     the subject matter hereof. Any promises, representations, warranties or
     guarantees not herein contained and hereinafter made shall have no force
     and effect unless in writing, signed by Borrower's, Agent's and each
     Lender's respective officers. Neither this Agreement nor any portion or
     provisions hereof may be changed, modified, amended, waived, supplemented,
     discharged, cancelled or terminated orally or by any course of dealing, or
     in any manner other than by an agreement in writing, signed by the party to
     be charged. Borrower acknowledges that it has been advised by counsel in
     connection with the execution of this Agreement and Other Documents and is
     not relying upon oral representations or statements inconsistent with the
     terms and provisions of this Agreement.

          (b) The Required Lenders, Agent with the consent in writing of the
     Required Lenders, and Borrower may, subject to the provisions of this
     Section 15.2 (b), from time to time enter into written supplemental
     agreements to this Agreement or the Other Documents executed by Borrower,
     for the purpose of adding or deleting any provisions or otherwise changing,
     varying or waiving in any manner the rights of Lenders, Agent or Borrower
     thereunder or the conditions, provisions or terms thereof or waiving any
     Event of Default thereunder, but only to the extent specified in such
     written agreements; provided, however, that no such supplemental agreement
     shall, without the consent of all Lenders:

               (i) increase the Commitment Percentage, the maximum dollar
          commitment of any Lender or the Maximum Revolving Advance Amount.

               (ii) extend the maturity of any Note or the due date for any
          amount payable hereunder, or decrease the rate of interest or reduce
          any fee payable by Borrower to Lenders pursuant to this Agreement.

               (iii) alter the definition of the term Required Lenders or alter,
          amend or modify this Section 15.2(b).

               (iv) release any Collateral during any calendar year (other than
          in accordance with the provisions of this Agreement) having an
          aggregate value in excess of $1,000,000.

               (v) change the rights and duties of Agent.

               (vi) permit any Revolving Advance to be made if after giving
          effect thereto the total of Revolving Advances outstanding hereunder
          would exceed the Formula Amount for more than sixty (60) consecutive
          Business Days or exceed one hundred and ten percent (110%) of the
          Formula Amount.


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               (vii) increase the Advance Rates above the Advance Rates in
          effect on the Closing Date.

Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.

     In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 15.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrower. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.

     Notwithstanding (a) the existence of a Default or an Event of Default, (b)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or (c) any other provision of this Agreement,
Agent may at its discretion and without the consent of the Required Lenders,
voluntarily permit the outstanding Revolving Advances at any time to exceed the
Formula Amount by up to ten percent (10%) of the Formula Amount for up to thirty
(30) consecutive Business Days (the "Out-of-Formula Loans "). If Agent is
willing in its sole and absolute discretion to make such Out-of-Formula Loans,
such Out-of-Formula Loans shall be payable on demand and shall bear interest at
the Default Rate for Revolving Advances consisting of Domestic Rate Loans;
provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).
For purposes of this paragraph, the discretion granted to Agent hereunder shall
not preclude involuntary overadvances that may result from time to time due to
the fact that the Formula Amount was unintentionally exceeded for any reason,
including, but not limited to, Collateral previously deemed to be either
"Eligible Receivables" or "Eligible Inventory", as applicable, becomes
ineligible, collections of Receivables applied to reduce outstanding Revolving
Advances are thereafter returned for insufficient funds or overadvances are made
to protect or preserve the Collateral. In the event Agent involuntarily permits
the outstanding Revolving Advances to exceed the Formula Amount by more than ten
percent (10%), Agent shall use its efforts to have Borrower decrease such excess
in as expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances


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made after Agent has determined the existence of involuntary overadvances shall
be deemed to be involuntary overadvances and shall be decreased in accordance
with the preceding sentence.

     In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 15.2, the Agent is hereby authorized by
Borrower and the Lenders, from time to time in the Agent's sole discretion, (A)
after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrower on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.

     15.3 Successors and Assigns; Participations; New Lenders.

          (a) This Agreement shall be binding upon and inure to the benefit of
     Borrower, Agent, each Lender, all future holders of the Obligations and
     their respective successors and assigns, except that Borrower may not
     assign or transfer any of its rights or obligations under this Agreement
     without the prior written consent of Agent and each Lender.

          (b) Borrower acknowledges that in the regular course of commercial
     banking business one or more Lenders may at any time and from time to time
     sell participating interests in the Advances to other financial
     institutions (each such transferee or purchaser of a participating
     interest, a "Transferee"). Each Transferee may exercise all rights of
     payment (including without limitation rights of set-off) with respect to
     the portion of such Advances held by it or other Obligations payable
     hereunder as fully as if such Transferee were the direct holder thereof
     provided that Borrower shall not be required to pay to any Transferee more
     than the amount which it would have been required to pay to Lender which
     granted an interest in its Advances or other Obligations payable hereunder
     to such Transferee had such Lender retained such interest in the Advances
     hereunder or other Obligations payable hereunder and in no event shall
     Borrower be required to pay any such amount arising from the same
     circumstances and with respect to the same Advances or other Obligations
     payable hereunder to both such Lender and such Transferee. Borrower hereby
     grants to any Transferee a continuing security interest in any deposits,
     moneys or other property actually or constructively held by such Transferee
     as security for the Transferee's interest in the Advances.

          (c) Any Lender may with the consent of Agent which shall not be
     unreasonably withheld or delayed sell, assign or transfer all or any part
     of its rights under this Agreement and the Other Documents to one or more
     additional banks or financial institutions and one or more additional banks
     or financial institutions may commit to make Advances hereunder (each a
     "Purchasing Lender"), in minimum amounts of not less than $5,000,000,
     pursuant to a Commitment Transfer Supplement, executed by a


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     Purchasing Lender, the transferor Lender, and Agent and delivered to Agent
     for recording. Any Purchasing Lender shall have a combined capital and
     surplus of at least $50,000,000. Upon such execution, delivery, acceptance
     and recording, from and after the transfer effective date determined
     pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
     thereunder shall be a party hereto and, to the extent provided in such
     Commitment Transfer Supplement, have the rights and obligations of a Lender
     thereunder with a Commitment Percentage as set forth therein, and (ii) the
     transferor Lender thereunder shall, to the extent provided in such
     Commitment Transfer Supplement, be released from its obligations under this
     Agreement, the Commitment Transfer Supplement creating a novation for that
     purpose. Such Commitment Transfer Supplement shall be deemed to amend this
     Agreement to the extent, and only to the extent, necessary to reflect the
     addition of such Purchasing Lender and the resulting adjustment of the
     Commitment Percentages arising from the purchase by such Purchasing Lender
     of all or a portion of the rights and obligations of such transferor Lender
     under this Agreement and the Other Documents. Borrower hereby consents to
     the addition of such Purchasing Lender and the resulting adjustment of the
     Commitment Percentages arising from the purchase by such Purchasing Lender
     of all or a portion of the rights and obligations of such transferor Lender
     under this Agreement and the Other Documents. Borrower shall execute and
     deliver such further documents and do such further acts and things as are
     reasonably necessary or desirable in order to effectuate the foregoing.

          (d) Agent shall maintain at its address a copy of each Commitment
     Transfer Supplement delivered to it and a register (the "Register") for the
     recordation of the names and addresses of each Lender and the outstanding
     principal, accrued and unpaid interest and other fees due hereunder. The
     entries in the Register shall be conclusive, in the absence of manifest
     error, and Borrower, Agent and Lenders may treat each Person whose name is
     recorded in the Register as the owner of the Advance recorded therein for
     the purposes of this Agreement. The Register shall be available for
     inspection by Borrower or any Lender at any reasonable time and from time
     to time upon reasonable prior notice. Agent shall receive a fee in the
     amount of $3,500 payable by the applicable Purchasing Lender upon the
     effective date of each transfer or assignment to such Purchasing Lender.

          (e) Borrower authorizes each Lender to disclose to any Transferee or
     Purchasing Lender and any prospective Transferee or Purchasing Lender any
     and all financial information in such Lender's possession concerning
     Borrower which has been delivered to such Lender by or on behalf of
     Borrower pursuant to this Agreement or in connection with such Lender's
     credit evaluation of Borrower, provided that such prospective Transferee or
     Purchasing Lender agrees in writing to keep such information confidential
     to the same extent required of the Lenders hereunder.

     15.4 Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that Borrower makes
a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for Borrower's benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any


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bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.

     15.5 Indemnity. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of the party
being indemnified.

     15.6 Notice. Any notice or request hereunder may be given to Borrower or to
Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice, request, demand, direction
or other communication (for purposes of this Section 15.6 only, a "Notice") to
be given to or made upon any party hereto under any provision of this Loan
Agreement shall be given or made by telephone or in writing (which includes by
means of electronic transmission (i.e., "e-mail") or facsimile transmission or
by setting forth such Notice on a site on the World Wide Web (a "Website Posting
") if Notice of such Website Posting (including the information necessary to
access such site) has previously been delivered to the applicable parties hereto
by another means set forth in this Section 15.6) in accordance with this Section
15.6. Any such Notice must be delivered to the applicable parties hereto at the
addresses and numbers set forth under their respective names on Section 15.6
hereof or in accordance with any subsequent unrevoked Notice from any such party
that is given in accordance with this Section 15.6. Any Notice shall be
effective:

          (a) In the case of hand-delivery, when delivered;

          (b) If given by mail, four days after such Notice is deposited with
     the United States Postal Service, with first-class postage prepaid, return
     receipt requested;

          (c) In the case of a telephonic Notice, when a party is contacted by
     telephone, if delivery of such telephonic Notice is confirmed no later than
     the next Business Day by hand delivery, a facsimile or electronic
     transmission, a Website Posting or an overnight courier delivery of a
     confirmatory Notice (received at or before noon on such next Business Day);

          (d) In the case of a facsimile transmission, when sent to the
     applicable party's facsimile machine's telephone number, if the party
     sending such Notice receives confirmation of the delivery thereof from its
     own facsimile machine;


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          (e) In the case of electronic transmission (including e-mail), when
     actually received;

          (f) In the case of a Website Posting, upon delivery of a Notice of
     such posting (including the information necessary to access such site) by
     another means set forth in this Section 15.6; and

          (g) If given by any other means (including by overnight courier), when
     actually received.

          Any Lender giving a Notice to Borrower shall concurrently send a copy
     thereof to the Agent, and the Agent shall promptly notify the other Lenders
     of its receipt of such Notice.

             (A)   If to Agent or PNC at:     PNC Bank, National Association
                                              One South Wacker Drive
                                              Suite 2980
                                              Chicago, Illinois 60606
                                              Attention: Peter Zimmerer
                                              Telephone: (312) 338-5662
                                              Facsimile: (312) 338-5671

                   with a copy to:            Piper Marbury Rudnick & Wolfe
                                              203 North LaSalle Street
                                              Suite 1800
                                              Chicago, Illinois 60601-1293
                                              Attention: William L. Rawson, Esq.
                                              Telephone: (312) 368-7075
                                              Facsimile: (312) 630-5347

             (B)   If to a Lender other than Agent, as specified on the
                   signature pages hereof

             (C)   If to Borrower:            Badger Paper Mills, Inc.
                                              200 West Front Street
                                              Peshtigo, Wisconsin 54157-0149
                                              Attention: Chief Financial Officer
                                              Telephone: (715) 582-4551
                                              Facsimile: (715) 582-5242

                   with a copy to:            Foley & Lardner
                                              777 East Wisconsin Avenue
                                              Milwaukee, Wisconsin 53202
                                              Attention: Edward J. Hammond, Esq.
                                              Telephone: (414) 297-5619
                                              Telecopier: (414) 297-4900


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<PAGE>
     15.7 Survival. The obligations of Borrower under Sections 2.2(f), 3.7, 3.9,
3.10, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and the
Other Documents and payment in full of the Obligations.

     15.8 Severability. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

     15.9 Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent, on its behalf or on behalf of Lenders, and
Lenders (a) in all efforts made to enforce payment of any Obligation or effect
collection of any Collateral, or (b) with respect to Agent alone, in connection
with the entering into, modification, amendment and administration and, with
respect to Agent and Lenders, in connection with the enforcement, of this
Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Agent's or any Lender's transactions with Borrower, or (e) in connection with
any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement and all related agreements, may be charged to
Borrower's Account and shall be part of the Obligations. Notwithstanding the
foregoing and notwithstanding any provision in this Agreement to the contrary,
Borrower shall have no responsibility for any taxes payable by Agent or any
Lender which are imposed on or measured by the net income of such Person.

     15.10 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy at law may prove to be inadequate relief to
Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving that actual damages are not an adequate remedy.

     15.11 Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to Borrower for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.

     15.12 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.

     15.13 Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.


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     15.14 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

     15.15 Confidentiality; Sharing Information.

          (a) Agent, each Lender and each Transferee shall hold all non-public
     information obtained by Agent, such Lender or such Transferee pursuant to
     the requirements of this Agreement in accordance with Agent's, such
     Lender's and such Transferee's customary procedures for handling
     confidential information of this nature; provided, however, Agent, each
     Lender and each Transferee may disclose such confidential information (a)
     to its examiners, affiliates, outside auditors, counsel and other
     professional advisors, (b) to Agent, any Lender or, subject to Section
     15.3(e), to any prospective Transferees and Purchasing Lenders, and (c) as
     required or requested by any Governmental Body or representative thereof or
     pursuant to legal process; provided, further that (i) unless specifically
     prohibited by applicable law or court order, Agent, each Lender and each
     Transferee shall use its best efforts prior to disclosure thereof, to
     notify Borrower of the applicable request for disclosure of such non-public
     information (A) by a Governmental Body or representative thereof (other
     than any such request in connection with an examination of the financial
     condition of a Lender or a Transferee by such Governmental Body) or (B)
     pursuant to legal process and (ii) in no event shall Agent, any Lender or
     any Transferee be obligated to return any materials furnished by Borrower
     other than those documents and instruments in possession of Agent or any
     Lender in order to perfect its Lien on the Collateral once the Obligations
     have been paid in full and this Agreement has been terminated.

          (b) Borrower acknowledges that from time to time financial advisory,
     investment banking and other services may be offered or provided to
     Borrower or one or more of its Affiliates (in connection with this
     Agreement or otherwise) by any Lender or by one or more Subsidiaries or
     Affiliates of such Lender and Borrower hereby authorizes each Lender to
     share any information delivered to such Lender by Borrower and its
     Subsidiaries pursuant to this Agreement, or in connection with the decision
     of such Lender to enter into this Agreement, to any such Subsidiary or
     Affiliate of such Lender, it being understood that any such Subsidiary or
     Affiliate of any Lender receiving such information shall be bound by the
     provisions of this Section 15.15 as if it were a Lender hereunder. Such
     authorization shall survive the repayment of the other Obligations and the
     termination of the Loan Agreement.

     15.16 Publicity. Borrower and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among
Borrower, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.

Each of the parties has signed this Agreement as of the day and year first above
written.


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                                        BADGER PAPER MILLS, INC.



                                        By: /s/ William H. Peters
                                           ------------------------------------
                                        Name: William H. Peters
                                        Title: Vice President and Chief
                                               Financial Officer



                                        PNC BANK, NATIONAL ASSOCIATION,
                                        as Lender and as Agent



                                        By: /s/ Joseph J. Fobbe
                                           ------------------------------------
                                        Name: Joseph J. Fobbe
                                        Title: Vice President

                                        Two Tower Center Boulevard
                                        East Brunswick, New Jersey 08816

                                        Commitment Percentage: 100%



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<PAGE>
STATE OF ILLINOIS              )
                               ) ss.
COUNTY OF COOK                 )

     On this 30th day of November, 2001, before me personally came William H.
Peters, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President and Chief Financial Officer of BADGER PAPER MILLS, INC., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.

                                        /s/ Ruth A. Cordes
                                        ----------------------------------------
                                        Notary Public



STATE OF ILLINOIS              )
                               ) ss.
COUNTY OF COOK                 )

     On this 30th day of November, 2001, before me personally came Joseph J.
Fobbe, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of PNC BANK, NATIONAL ASSOCIATION, and that he was authorized
to sign his name thereto.


                                        /s/ Ruth A. Cordes
                                        ----------------------------------------
                                        Notary Public


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