Document:

MORTGAGE

DOCUMENT NUMBER:

RECORDATION REQUESTED BY:
WISCONSIN COMMUNITY BANK
WISCONSIN BUSINESS BANK - BRANCH
GREEN BAY OFFICE
1510 HWY 41 PO BOX 5307
DE PERE, WI  54115-5307

PARCEL I.D. NUMBER:

THIS MORTGAGE dated September 19, 2002, is made and executed between BADGER
PAPER MILLS, INC., whose address is 200 W. FRONT ST., PESHTIGO, WI 54157; A
WISCONSIN CORPORATION (referred to below as "Grantor") and WISCONSIN COMMUNITY
BANK, whose address is GREEN BAY OFFICE, 1510 HWY 41 PO BOX 5307, DE PERE, WI
54115-5307 (referred to below as "Lender").

GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages and conveys to
Lender all of Grantor's right, title, and interest in and to the following
described real property, together with all existing or subsequently erected or
affixed building, improvements and fixtures; privileges, hereditaments,
easements, rights of way, and appurtenances; all water, water rights,
watercourses and ditch rights (including stock in utilities with ditch or
irrigation rights); and all other rights, royalties, and profits relating to the
real property, including without limitation all minerals, oil, gas, geothermal
and similar matters, (the "Real Property") located in MARINETTE County, State of
Wisconsin:

         See EXHIBIT A, which is attached to this Mortgage and made a part of
         this Mortgage as if fully set forth herein.

The Real Property or its address is commonly known as 200 W. FRONT ST.,
PESHTIGO, WI 54157.

CROSS-COLLATERALIZATION. In addition to the Note, this Mortgage secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party

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or otherwise, and whether recovery upon such amounts may be or hereafter may
become barred by any statute of limitations, and whether the obligation to repay
such amounts may be or hereafter may become otherwise unenforceable.

This property is not the Grantor's homestead.

Grantor presently assigns to Lender all of Grantor's right, title, and interest
in and to all present and future leases of the Property and all Rents from the
Property. In addition, Grantor grants to Lender a Uniform Commercial Code
security interest in the Personal Property and Rents.

FUTURE ADVANCES. Specifically, without limitation, this Mortgage secures, in
addition to the amounts specified in the Note, all future amounts Lender in its
discretion may loan to Grantor, together with all interest thereon.

THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE
INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE
RELATED DOCUMENTS, AND THIS MORTGAGE. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE
FOLLOWING TERMS:

PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage, Grantor
shall pay to Lender all amounts secured by this Mortgage as they become due and
shall strictly perform all of Grantor's obligations under this Mortgage.

POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor's
possession and use of the Property shall be governed by the following
provisions:

         Possession and Use. Until the occurrence of an Event of Default,
         Grantor may (1) remain in possession and control of the Property; (2)
         use, operate or manage the Property; and (3) collect the Rents from the
         Property.

         Duty to Maintain. Grantor shall maintain the Property in tenantable
         condition and promptly perform all repairs, replacements, and
         maintenance necessary to preserve its value.

         Compliance With Environmental Laws. Grantor represents and warrants to
         Lender that: (1) During the period of Grantor's ownership of the
         Property, there has been no use, generation, manufacture, storage,
         treatment, disposal, release or threatened release of any Hazardous
         Substance by any person on, under, about or from the Property; (2)
         Grantor has no knowledge of, or reason to believe that there has been,
         except as previously disclosed to and acknowledged by Lender in
         writing, (a) any breach or violation of any Environmental Laws, (b) any
         use, generation, manufacture, storage, treatment, disposal, release or
         threatened release of any Hazardous Substance on, under, about or from
         the Property by any prior owners or occupants of the Property, or (c)
         any actual or threatened litigation or claims of any kind by any person
         relating to such matters; and (3) Except as

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         previously disclosed to and acknowledged by Lender in writing, (a)
         neither Grantor nor any tenant, contractor, agent or other authorized
         user of the Property shall use, generate, manufacture, store, treat,
         dispose of or release any Hazardous Substance on, under, about or from
         the Property; and (b) any such activity shall be conducted in
         compliance with all applicable federal, state, and local laws,
         regulations and ordinances, including without limitation all
         Environmental Laws. Grantor authorizes Lender and its agents to enter
         upon the Property to make such inspections and tests, at Grantor's
         expense, as Lender may deem appropriate to determine compliance of the
         Property with this section of the Mortgage. Any inspections or tests
         made by Lender shall be for Lender's purposes only and shall not be
         construed to create any responsibility or liability on the part of
         Lender to Grantor or to any other person. The representations and
         warranties contained herein are based on Grantor's due diligence in
         investigating the Property for Hazardous Substances. Grantor hereby (1)
         releases and waives any future claims against Lender for indemnity or
         contribution in the event Grantor becomes liable for cleanup or other
         costs under any such laws; and (2) agrees to indemnify and hold
         harmless Lender against any and all claims, losses, liabilities,
         damages, penalties, and expenses which Lender may directly or
         indirectly sustain or suffer resulting from a breach of this section of
         the Mortgage or as a consequence of any use, generation, manufacture,
         storage, disposal, release or threatened release occurring prior to
         Grantor's ownership or interest in the Property, whether or not the
         same was or should have been known to Grantor. The provisions of this
         section of the Mortgage, including the obligation to indemnify, shall
         survive the payment of the indebtedness and the satisfaction and
         reconveyance of the lien of this Mortgage and shall not be affected by
         Lender's acquisition of any interest in the Property, whether by
         foreclosure or otherwise.

         Nuisance, Waste. Grantor shall not cause, conduct or permit any
         nuisance nor commit, permit, or suffer any stripping of or waste on or
         to the Property or any portion of the Property. Without limiting the
         generality of the foregoing, Grantor will not remove, or grant to any
         other party the right to remove, any timber, minerals (including oil
         and gas), coal, clay, scoria, soil, gravel or rock products without
         Lender's prior written consent.

         Removal of Improvements. Grantor shall not demolish or remove any
         Improvements from the Real Property without Lender's prior written
         consent. As a condition to the removal of any Improvements, Lender may
         require Grantor to make arrangements satisfactory to Lender to replace
         such Improvements with Improvements of at least equal value.

         Lender's Right to Enter. Lender and Lender's agents and representatives
         may enter upon the Real Property at all reasonable times to attend to
         Lender's interests and to inspect the Real Property for purposes of
         Grantor's compliance with the terms and conditions of this Mortgage.

         Compliance with Governmental Requirements. Grantor shall promptly
         comply with all laws, ordinances, and regulations, now or hereafter in
         effect, of all governmental authorities applicable to the use or
         occupancy of the Property, including without limitation, the Americans
         With Disabilities Act. Grantor may contest in good faith any

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         such law, ordinance, or regulation and withhold compliance during any
         proceeding, including appropriate appeals, so long as Grantor has
         notified Lender in writing prior to doing so and so long as, in
         Lender's sole opinion, Lender's interests in the Property are not
         jeopardized. Lender may require Grantor to post adequate security or a
         surety bond, reasonably satisfactory to Lender, to protect Lender's
         interest.

         Duty to Protect. Grantor agrees neither to abandon nor leave unattended
         the Property. Grantor shall do all other acts, in addition to those
         acts set forth above in this section, which from the character and use
         of the Property are reasonably necessary to protect and preserve the
         Property.

DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's option, declare
immediately due and payable all sums secured by this Mortgage upon the sale or
transfer, without Lender's prior written consent, of all or any part of the Real
Property, or any interest in the Real Property. A "sale or transfer" means the
conveyance of Real Property or any right, title or interest in the Real
Property; whether legal, beneficial or equitable; whether voluntary or
involuntary; whether by outright sale, deed, installment sale contract, land
contract, contract for deed, leasehold interest with a term greater than three
(3) years, lease-option contract, or by sale, assignment, or transfer of any
beneficial interest in or to any land trust holding title to the Real Property,
or by any other method of conveyance of an interest in the Real Property. If any
Grantor is a corporation, partnership or limited liability company, transfer
also includes any change in ownership of more than twenty-five percent (25%) of
the voting stock, partnership interests or limited liability company interests,
as the case may be, of such Grantor. However, this option shall not be exercised
by Lender if such exercise is prohibited by federal law or by Wisconsin law.

TAXES AND LIENS. The following provisions relating to the taxes and liens on the
Property are part of this Mortgage:

         Payment. Grantor shall pay when due (and in all events prior to
         delinquency) all taxes, payroll taxes, special taxes, assessments,
         water charges and sewer service charges levied against or on account of
         the Property or this Mortgage, and shall pay when due all claims for
         work done on or for services rendered or material furnished to the
         Property. Grantor shall maintain the Property free of any liens having
         priority over or equal to the interest of Lender under this Mortgage,
         except for those liens specifically agreed to in writing by Lender, and
         except for the lien of taxes and assessments not due as further
         specified in the Right to Contest paragraph.

         Right to Contest. Grantor may withhold payment of any tax, assessment,
         or claim in connection with a good faith dispute over the obligation to
         pay, so long as Lender's interest in the Property is not jeopardized.
         If a lien arises or is filed as a result of nonpayment, Grantor shall
         within fifteen (15) days after the lien arises or, if a lien is filed,
         within fifteen (15) days after Grantor has notice of the filing, secure
         the discharge of the lien, or if requested by Lender, deposit with
         Lender cash or a sufficient corporate surety bond or other security
         satisfactory to Lender in an amount sufficient to discharge the lien
         plus any costs and permissible fees, or other charges that could accrue
         as a result

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         of a foreclosure or sale under the lien. In any contest, Grantor shall
         defend itself and Lender and shall satisfy any adverse judgment before
         enforcement against the Property. Grantor shall name Lender as an
         additional obligee under any surety bond furnished in the contest
         proceedings.

         Evidence of Payment. Grantor shall upon demand furnish to Lender
         satisfactory evidence of payment of the taxes or assessments and shall
         authorize the appropriate governmental official to deliver to Lender at
         any time a written statement of the taxes and assessments against the
         Property.

         Notice of Construction. Grantor shall notify Lender at least fifteen
         (15) days before any work is commenced, any services are furnished, or
         any materials are supplied to the Property, if any mechanic's lien,
         materialmen's lien, or other lien could be asserted on account of the
         work, services, or materials. Grantor will upon request of Lender
         furnish to Lender advance assurances satisfactory to Lender that
         Grantor can and will pay the cost of such Improvements.

PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Mortgage:

         Maintenance of Insurance. Grantor shall procure and maintain policies
         of fire insurance with standard extended coverage endorsements on a
         replacement basis for the full insurable value covering all
         Improvements on the Real Property in an amount sufficient to avoid
         application of any coinsurance clause, and with a standard mortgage
         clause in favor of Lender. Grantor shall also procure and maintain
         comprehensive general liability insurance in such coverage amounts as
         Lender may request with Lender being named as additional insureds in
         such liability insurance policies. Additionally, Grantor shall maintain
         such other insurance, including but not limited to hazard, business
         interruption and boiler insurance as Lender may require. Policies shall
         be written by such insurance companies and in such form as may be
         reasonably acceptable to Lender. Grantor shall deliver to Lender
         certificates of coverage from each insurer containing a stipulation
         that coverage will not be cancelled or diminished without a minimum of
         ten (10) days' prior written notice to Lender and not containing any
         disclaimer of the insurer's liability for failure to give such notice.
         Each insurance policy also shall include an endorsement providing that
         coverage in favor of Lender will not be impaired in any way by any act,
         omission or default of Grantor or any other person. Should the Real
         Property be located in an area designated by the Director of the
         Federal Emergency Management Agency as a special flood hazard area,
         Grantor agrees to obtain and maintain Federal Flood Insurance, if
         available, within 45 days after notice is given by Lender that the
         Property is located in a special flood hazard area, for the full unpaid
         principal balance of the loan and any prior liens on the property
         securing the loan, up to the maximum policy limits set under the
         National Flood Insurance Program, or as otherwise required by Lender,
         and to maintain such insurance for the term of the loan.

         Application of Proceeds. Grantor shall promptly notify Lender of any
         loss or damage to the Property. Lender may make proof of loss if
         Grantor fails to do so within fifteen (15)

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         days of the casualty. Whether or not Lender's security is impaired,
         Lender may, at Lender's election, receive and retain the proceeds of
         any insurance and apply the proceeds to the reduction of the
         indebtedness, payment of any lien affecting the Property, or the
         retention and repair of the Property. If Lender elects to apply the
         proceeds to restoration and repair, Grantor shall repair or replace the
         damaged or destroyed improvements in a manner satisfactory to Lender.
         Lender shall, upon satisfactory proof of such expenditure, pay or
         reimburse Grantor from the proceeds for the reasonable cost of repair
         or restoration if Grantor is not in default under this Mortgage. Any
         proceeds which have not been disbursed within 180 days after their
         receipt and which Lender has not committed to the repair or restoration
         of the Property shall be used first to pay any amount owing to Lender
         under this Mortgage, then to pay accrued interest, and the remainder,
         if any, shall be applied to the principal balance of the indebtedness.
         If Lender holds any proceeds after payment in full of the indebtedness,
         such proceeds shall be paid to Grantor as Grantor's interests may
         appear.

         Unexpired Insurance at Sale. Any unexpired insurance shall inure to the
         benefit of, and pass to, the purchaser of the Property covered by this
         Mortgage at any trustee's sale or other sale held under the provisions
         of this Mortgage, or at any foreclosure sale of such Property.

         Grantor's Report on Insurance. Upon request of Lender, however not more
         than once a year, Grantor shall furnish to Lender a report on each
         existing policy of insurance showing: (1) the name of the insurer; (2)
         the risks insured; (3) the amount of the policy; (4) the property
         insured, the then current replacement value of such property, and the
         manner of determining that value; and (5) the expiration date of the
         policy. Grantor shall, upon request of Lender, have an independent
         appraiser satisfactory to Lender determine the cash value replacement
         cost of the Property.

TAX AND INSURANCE RESERVES. Subject to any limitations set by applicable law,
Lender may require Grantor to maintain with Lender reserves for payment of
annual taxes, assessments, and insurance premiums, which reserves shall be
created by advance payment or monthly payments of a sum estimated by Lender to
be sufficient to produce, amounts at least equal to the taxes, assessments, and
insurance premiums to be paid. The reserve funds shall be held by Lender as a
general deposit from Grantor, which Lender may satisfy by payment of the taxes,
assessments, and insurance premiums required to be paid by Grantor as they
become due. Lender shall have the right to draw upon the reserve funds to pay
such items, and Lender shall not be required to determine the validity or
accuracy of any item before paying it. Nothing in the Mortgage shall be
construed as requiring Lender to advance other monies for such purpose, and
Lender shall not incur any liability for anything it may do or omit to do with
respect to the reserve account. Subject to any limitations set by applicable
law, if the reserve funds disclose a shortage or deficiency, Grantor shall pay
such shortage or deficiency as required by Lender. All amounts in the reserve
account are hereby pledged to further secure the indebtedness, and Lender is
hereby authorized to withdraw and apply such amounts on the indebtedness upon
the occurrence of an Event of Default. Lender shall not be required to pay any
interest or earnings on the reserve funds unless required by law or agreed to by
Lender in writing. Lender does not

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hold the reserve funds in trust for Grantor, and Lender is not Grantor's agent
for payment of the taxes and assessments required to be paid by Grantor.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Property or if Grantor fails to
comply with any provision of this Mortgage or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Mortgage or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Property and paying all costs
for insuring, maintaining and preserving the Property. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
payment by Grantor. All such expenses will become a part of the indebtedness
and, at Lender's option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note's maturity. The Mortgage also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon Default.

WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of
the Property are a part of this Mortgage:

         Title. Grantor warrants that: (a) Grantor holds good and marketable
         title of record to the Property in fee simple, free and clear of all
         liens and encumbrances other than those set forth in the Real Property
         description or in any title insurance policy, title report, or final
         title opinion issued in favor of, and accepted by, Lender in connection
         with this Mortgage, and (b) Grantor has the full right, power, and
         authority, acting alone, to execute and deliver this Mortgage to
         Lender.

         Defense of Title. Subject to the exception in the paragraph above,
         Grantor warrants and will forever defend the title to the Property
         against the lawful claims of all persons. In the event any action or
         proceeding is commenced that questions Grantor's title or the interest
         of Lender under this Mortgage, Grantor shall defend the action at
         Grantor's expense. Grantor may be the nominal party in such proceeding,
         but Lender shall be entitled to participate in the proceeding and to be
         represented in the proceeding by counsel of Lender's own choice, and
         Grantor will deliver, or cause to be delivered, to Lender such
         instruments as Lender may request from time to time to permit such
         participation.

         Subrogation. Grantor covenants that Lender is subrogated to the lien of
         any mortgage or any other lien which is discharged, whether in whole or
         in part, by the proceeds of the Note.

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         Compliance with Laws. Grantor warrants that the Property and Grantor's
         use of the Property complies with all existing applicable laws,
         ordinances, and regulations of governmental authorities.

         Survival of Representations and Warranties. All representations,
         warranties, and agreements made by Grantor in this Mortgage shall
         survive the execution and delivery of this Mortgage, shall be
         continuing in nature, and shall remain in full force and effect until
         such time as Grantor's indebtedness shall be paid in full.

CONDEMNATION. The following provisions relating to condemnation proceedings are
a part of this Mortgage:

         Proceedings. If any proceeding in condemnation is commenced, Grantor
         shall promptly notify Lender in writing, and Grantor shall promptly
         take such steps as may be necessary to defend the action and obtain the
         award. Grantor may be the nominal party in such proceeding, but Lender
         shall be entitle to participate in the proceeding and to be represented
         in the proceeding by counsel of its own choice, and Grantor will
         deliver or cause to be delivered to Lender such instruments and
         documentation as may be requested by Lender from time to time to permit
         such participation.

         Application of Net Proceedings. If all or any part of the Property is
         condemned by eminent domain proceedings or by any proceeding or
         purchase in lieu of condemnation or if all or any part of the Property
         is sold in lieu of condemnation, Lender may at its election require
         that all or any portion of the net proceeds of the award or sale be
         applied to the indebtedness or the repair or restoration of the
         Property. The net proceeds of the award or sale shall mean the award or
         sale after payment of all reasonable costs, expenses, and attorneys'
         fees incurred by Lender in connection with the condemnation or sale in
         lieu of condemnation.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following
provisions relating to governmental taxes, fees and charges are a part of this
Mortgage:

         Current Taxes, Fees and Charges. Upon request of Lender, Grantor shall
         execute such documents in addition to this Mortgage and take whatever
         other action is requested by Lender to perfect and continue Lender's
         lien on the Real Property. Grantor shall reimburse Lender for all
         taxes, as described below, together with all expenses incurred in
         recording, perfecting or continuing this Mortgage, including without
         limitation all taxes, fees, documentary stamps, and other charges for
         recording or registering this Mortgage.

         Taxes. The following shall constitute taxes to which this section
         applies: (1) a specific tax upon this type of Mortgage or upon all or
         any part of the indebtedness secured by this Mortgage; (2) a specific
         tax on Grantor which Grantor is authorized or required to deduct from
         payments on the indebtedness secured by this type of Mortgage; (3) a
         tax on this type of Mortgage chargeable against the Lender or the
         holder of the Note; and (4) a

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         specific tax on all or any portion of the indebtedness or on payments
         of principal and interest made by Grantor.

         Subsequent Taxes. If any tax to which this section applies is enacted
         subsequent to the date of this Mortgage, this event shall have the same
         effect as an Event of Default, and Lender may exercise any or all of
         its available remedies for an Event of Default as provided below unless
         Grantor either (1) pays the tax before it becomes delinquent, or (2)
         contests the tax as provided above in the Taxes and Liens section and
         deposits with Lender cash or a sufficient corporate surety bond or
         other security satisfactory to Lender.

SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to
this Mortgage as a security agreement are a part of this Mortgage:

         Security Agreement. This instrument shall constitute a Security
         Agreement to the extent any of the Property constitutes fixtures, and
         Lender shall have all of the rights of a secured party under the
         Uniform Commercial Code as amended from time to time.

         Security Interest. Upon request by Lender, Grantor shall execute
         financing statements and take whatever other action is requested by
         Lender to perfect and continue Lender's security interest in the Rents
         and Personal Property. In addition to recording this Mortgage in the
         real property records, Lender may, at any time and without further
         authorization from Grantor, file executed counterparts, copies or
         reproductions of this Mortgage as a financing statement. Grantor shall
         reimburse Lender for all expenses incurred in perfecting or continuing
         this security interest. Upon default, Grantor shall not remove, sever
         or detach the Personal Property from the Property. Upon default,
         Grantor shall assemble any Personal Property not affixed to the
         Property in a manner and at a place reasonably convenient to Grantor
         and Lender and make it available to Lender within three (3) days after
         receipt of written demand from Lender to the extent permitted by
         applicable law.

         Addressees. The mailing addresses of Grantor (debtor) and Lender
         (secured party) from which information concerning the security interest
         granted by this Mortgage may be obtained (each as required by the
         Uniform Commercial Code) are as stated on the first page of this
         Mortgage.

FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage:

         Further Assurances. At any time, and from time to time, upon request of
         Lender, Grantor will make, execute and deliver, or will cause to be
         made, executed or delivered, to Lender or to Lender's designee, and
         when requested by Lender, cause to be filed, recorded, refiled, or
         rerecorded, as the case may be, at such times and in such offices and
         places as Lender may deem appropriate, any and all such mortgages,
         deeds of trust, security deeds, security agreements, financing
         statements, continuation statements, instruments of further assurance,
         certificates, and other documents as may, in the sole opinion of
         Lender, be necessary or desirable in order to effectuate, complete,
         perfect, continue, or preserve (1)

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         Grantor's obligations under the Note, this Mortgage, and the Related
         documents, and (2) the liens and security interests created by this
         Mortgage as first and prior liens on the Property, whether now owned or
         hereafter acquired by Grantor. Unless prohibited by law or Lender
         agrees to the contrary in writing, Grantor shall reimburse Lender for
         all costs and expenses incurred in connection with the matters referred
         to in this paragraph.

         Attorney-in-Fact. If Grantor fails to do any of the things referred to
         in the preceding paragraph. Lender may do so for and in the name of
         Grantor and at Grantor" expense. For such purposes, Grantor hereby
         irrevocably appoints Lender as Grantor's attorney-in-fact for the
         purpose of making, executing, delivering, filing, recording, and doing
         all other things as may be necessary or desirable, in Lender's sole
         opinion, to accomplish the matters referred to in the preceding
         paragraph.

FULL PERFORMANCE. If Grantor pays all the indebtedness, including without
limitation all future advances, when due, and otherwise performs all the
obligations imposed upon Grantor under this Mortgage, Lender shall execute and
deliver to Grantor a suitable satisfaction of this Mortgage and suitable
statements of termination of any financing statement on file evidencing Lender's
security interest in the Rents and the Personal Property. Grantor will pay, if
permitted by applicable law, any reasonable termination fee as determined by
Lender from time to time.

EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute
an Event of Default under this Mortgage:

         Payment Default. Grantor fails to make any payment when due under the
         indebtedness.

         Default on Other Payments. Failure of Grantor within the time required
         by this Mortgage to make any payment for taxes or insurance, or any
         other payment necessary to prevent filing of or to effect discharge of
         any lien.

         Other Defaults. Grantor fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this Mortgage or
         in any of the Related Documents or to comply with or to perform any
         term, obligation, covenant or condition contained in any other
         agreement between Lender and Grantor.

         Default in Favor of Third Parties. Should Grantor default under any
         loan, extension of credit, security agreement, purchase or sales
         agreement, or any other agreement, in favor of any other creditor or
         person that may materially affect any of Grantor's property or
         Grantor's ability to repay the indebtedness of Grantor's ability to
         perform Grantor's obligations under this Mortgage or any related
         document.

         False Statements. Any warranty, representation or statement made or
         furnished to Lender by Grantor or on Grantor's behalf under this
         Mortgage or the Related Documents is false and misleading in any
         material respect, either now or at the time made or furnished or
         becomes false or misleading at any time thereafter.

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         Defective Collateralization. This Mortgage or any of the Related
         Documents ceases to be in full force and effect (including failure of
         any collateral document to create a valid and perfected security
         interest or lien) at any time and for any reason.

         Insolvency. The dissolution or termination of Grantor's existence as a
         going business, the insolvency of Grantor, the appointment of a
         receiver for any part of Grantor's property, any assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Grantor.

         Creditor or Forfeiture Proceedings. Commencement of foreclosure or
         forfeiture proceedings, whether by judicial proceeding, self-help,
         repossession or any other method, by any creditor of Grantor or by any
         governmental agency against any property securing the indebtedness.
         This includes a garnishment of any of Grantor's accounts, including
         deposit accounts, with Lender. However, this Event of Default shall not
         apply if there is a good faith dispute by Grantor as to the validity or
         reasonableness of the claim which is the basis of the creditor or
         forfeiture proceeding and if Grantor gives Lender written notice of the
         creditor or forfeiture proceeding and deposits with Lender monies or a
         surety bond for the creditor or forfeiture proceeding, in an amount
         determined by Lender, in its sole discretion, as being an adequate
         reserve or bond for the dispute.

         Breach of Other Agreement. Any breach by Grantor under the terms of any
         other agreement between Grantor and Lender that is not remedied within
         any grace period provided therein, including without limitation any
         agreement concerning any indebtedness or other obligation of Grantor to
         Lender, whether existing now or later.

         Events Affecting Guarantor. Any of the preceding events occurs with
         respect to any guarantor, endorser, surety, or accommodation party of
         any of the indebtedness or any guarantor, endorser, surety, or
         accommodation party dies or becomes incompetent, or revokes or disputes
         the validity of, or liability under, any Guaranty of the indebtedness.
         In the event of a death, Lender, at its option, may, but shall not be
         required to, permit the guarantor's estate to assume unconditionally
         the obligations arising under the guaranty in a manner satisfactory to
         Lender, and, in doing so, cure any Event of Default.

         Adverse Change. A material adverse change occurs in Grantor's financial
         condition, or Lender believes the prospect of payment or performance of
         the indebtedness is impaired.

         Insecurity. Lender in good faith believes itself insecure.

         Right to Cure. If such a failure is curable and if Grantor has not been
         given a notice of a breach of the same provision of this Mortgage with
         the preceding twelve (12) months, it may be cured (and no Event of
         Default will have occurred) if Grantor, after Lender sends written
         notice demanding cure of such failure: (a) cures the failure within
         thirty (30) days; or (b) if the cure requires more than thirty (30)
         days, immediately initiates steps sufficient to cure the failure and
         thereafter continues and completes all reasonable and necessary steps
         sufficient to produce compliance as soon as reasonably practical.

                                       11
<PAGE>

RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default and
at any time thereafter, Lender, at Lender's option, may exercise any one or more
of the following rights and remedies, in addition to any other rights or
remedies provided by law:

         Accelerate Indebtedness. Lender shall have the right at it option
         without notice to Grantor to declare the entire indebtedness
         immediately due and payable, including any prepayment penalty which
         Grantor would be required to pay.

         UCC Remedies. With respect to all or any part of the Personal Property,
         Lender shall have all the rights and remedies of a secured party under
         the Uniform Commercial Code.

         Collect Rents. Lender shall have the right, without notice to Grantor,
         to take possession of the Property and collect the Rents, including
         amounts past due and unpaid, and apply the net proceeds, over and above
         Lender's costs, against the indebtedness. In furtherance of this right,
         Lender may require any tenant or other user of the Property to make
         payments of rent or use fees directly to Lender. If the Rents are
         collected by Lender, then Grantor irrevocably designates Lender as
         Grantor's attorney-in-fact to endorse instruments received in payment
         thereof in the name of Grantor and to negotiate the same and collect
         the proceeds. Payments by tenants or other users to Lender in response
         to Lender's demand shall satisfy the obligations for which the payments
         are made, whether or not any proper grounds for the demand existed.
         Lender may exercise its rights under this subparagraph either in
         person, by agent, or through a receiver.

         Appoint Receiver. Lender shall have the right to have a receiver
         appointed to take possession of all or any part of the Property, with
         the power to protect and preserve the Property, to operate the Property
         preceding foreclosure or sale, and to collect the Rents from the
         Property and apply the proceeds, over and above the cost of the
         receivership, against the indebtedness or as the court may direct. The
         receiver may serve without bond if permitted by law. Lender's right to
         the appointment of a receiver shall exist whether or not the apparent
         value of the Property exceeds the indebtedness by a substantial amount.
         Employment by Lender shall not disqualify a person from serving as a
         receiver.

         Judicial Foreclosure. Lender may obtain a judicial decree foreclosing
         Grantor's interest in all or any part of the Property.

         Nonjudicial Sale. If permitted by applicable law, Lender may foreclose
         Grantor's interest in all or any part of the Personal Property or the
         Real Property by non-judicial sale.

         Deficiency Judgment. If permitted by applicable law, Lender may obtain
         a judgment for any deficiency remaining in the indebtedness due to
         Lender after application of all amounts received from the exercise of
         the rights provided in this section.

         Foreclosure without Deficiency Judgment. Grantor agrees to the
         provisions of Wis. Stats. Section 846.101 (as the same may be amended
         or renumbered from time to time) if the Real Property is twenty (20)
         acres or less, and is either (1) a 1-4 family residence that

                                       12
<PAGE>

         is owner-occupied at the initiation of a foreclosure proceeding, (2) a
         church, (3) a farm, or (4) is owned by a tax exempt charitable
         organization. Pursuant to Wis. Stats. Section 846.101, Lender, upon
         waiving the right to judgment for any deficiency, may conduct a
         foreclosure sale of the Real Property six (6) months after a
         foreclosure judgment is entered. If the Real Property is a type other
         than that described in Wis. Stats. Section 846.101(1), then Grantor
         agrees to the provisions of Wis. Stats. Section 846.103 (as the same
         may be amended or renumbered from time to time) permitting Lender, upon
         waiving the right to judgment for any deficiency, to conduct a
         foreclosure sale of the Real Property three (3) months after a
         foreclosure judgment is entered.

         Tenancy at Sufferance. If Grantor remains in possession of the Property
         after the Property is sold as provided above or Lender otherwise
         becomes entitled to possession of the Property upon default of Grantor,
         Grantor shall become a tenant at sufferance of Lender or the purchaser
         of the Property and shall, at Lender's option, either (1) pay a
         reasonable rental for the use of the Property, or (2) vacate the
         Property immediately upon the demand of Lender.

         Other Remedies. Lender shall have all other rights and remedies
         provided in this Mortgage or the Note or available at law or in equity.

         Sale of the Property. To the extent permitted by applicable law,
         Grantor hereby waives any and all right to have the Property
         marshalled. In exercising its rights and remedies, Lender shall be free
         to sell all or any part of the Property together or separately, in one
         sale or by separate sales, and to execute and deliver to the purchasers
         of the Property deeds of conveyance pursuant to law. Lender shall be
         entitled to bid at any public sale on all or any portion of the
         Property.

         Notice of Sale. Lender shall give Grantor reasonable notice of the time
         and place of any public sale of the Personal Property or of the time
         after which any private sale or other intended disposition of the
         Personal Property is to be made. Reasonable notice shall mean notice
         given at least fifteen (15) days before the time of the sale or
         disposition.

         Election of Remedies. Election by Lender to pursue any remedy shall not
         exclude pursuit of any other remedy, and an election to make
         expenditures or to take action to perform an obligation of Grantor
         under this Mortgage, after Grantor's failure to perform, shall not
         affect Lender's right to declare a default and exercise its remedies.
         Nothing under this Mortgage or otherwise shall be construed so as to
         limit or restrict the rights and remedies available to Lender following
         an Event of Default, or in any way to limit or restrict the rights and
         ability of Lender to proceed directly against Grantor and/or against
         any other co-maker, guarantor, surety or endorser and/or to proceed
         against any other collateral directly or indirectly securing the
         indebtedness.

         Expenses. If Lender institutes any suit or action to enforce any of the
         terms of this Mortgage, Lender shall be entitled to recover such sum as
         the court may adjudge reasonable. Whether or not any court action is
         involved, all reasonable expenses Lender incurs that in Lender's
         opinion are necessary at any time for the protection of its interest

                                       13
<PAGE>

         or the enforcement of its rights shall become a part of the
         indebtedness payable on demand and shall bear interest at the Note rate
         from the date of the expenditure until repaid. Expenses covered by this
         paragraph include, without limitation, however subject to any limits
         under applicable law, Lender's legal expenses whether or not there is a
         lawsuit, including expenses for bankruptcy proceedings (including
         efforts to modify or vacate any automatic stay or injunction), appeals,
         and any anticipated post-judgment collection services, the cost of
         searching records, obtaining title reports (including foreclosure
         reports), surveyors' reports, and appraisal fees and title insurance,
         to the extent permitted by applicable law. Grantor also will pay any
         court costs, in addition to all other sums provided by law.

NOTICES. Any notice required to be given under this Mortgage, including without
limitation any notice of default and any notice of sale shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Mortgage.
All copies of notices of foreclosure from the holder of any lien which has
priority over this Mortgage shall be sent to Lender's address, as shown near the
beginning of this Mortgage. Any party may change its address for notices under
this Mortgage by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor's
current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Mortgage:

         Amendments. This Mortgage, together with any Related Documents,
         constitutes the entire understanding and agreement of the parties as to
         the matters set forth in this Mortgage. No alteration of or amendment
         to this Mortgage shall be effective unless given in writing and signed
         by the party or parties sought to be charged or bound by the alteration
         or amendment.

         Annual Reports. If the Property is used for purposes other than
         Grantor's residence, Grantor shall furnish to Lender, upon request, a
         certified statement of net operating income received from the Property
         during Grantor's previous fiscal year in such form and detail as Lender
         shall require. "Net operating income" shall mean all cash receipts from
         the Property less all cash expenditures made in connection with the
         operation of the Property.

         Caption Headings. Caption headings in this Mortgage are for convenience
         purposes only and are not to be used to interpret or define the
         provisions of this Mortgage.

                                       14
<PAGE>

         Governing Law. This Mortgage will be governed by, construed and
         enforced in accordance with federal law and the laws of the State of
         Wisconsin. This Mortgage has been accepted by Lender in the State of
         Wisconsin.

         No Wavier by Lender. Lender shall not be deemed to have waived any
         rights under this Mortgage unless such waiver is given in writing and
         signed by Lender. No delay or omission on the part of Lender in
         exercising any right shall operate as a waiver of such right or any
         other right. A waiver by Lender of a provision of this Mortgage shall
         not prejudice or constitute a waiver of Lender's right otherwise to
         demand strict compliance with that provision or any other provision of
         this Mortgage. No prior waiver by Lender, nor any course of dealing
         between Lender and Grantor, shall constitute a waiver of any of
         Lender's rights or of any of Grantor's obligations as to any future
         transactions. Whenever the consent of Lender is required under this
         Mortgage, the granting of such consent by Lender in any instance shall
         not constitute continuing consent to subsequent instances where such
         consent is required and in all cases such consent may be granted or
         withheld in the sole discretion of Lender.

         Severability. If a court of competent jurisdiction finds any provision
         of this Mortgage to be illegal, invalid, or unenforceable as to any
         circumstance, that finding shall not make the offending provision
         illegal, invalid, or unenforceable as to any other circumstance. If
         feasible, the offending provision shall be considered modified so that
         it becomes legal, valid and enforceable. If the offending provision
         cannot be so modified, it shall be considered deleted from this
         Mortgage. Unless otherwise required by law, the illegality, invalidity,
         or unenforceability of any provision of this Mortgage shall not affect
         the legality, validity or enforceability of any other provision of this
         Mortgage.

         Merger. There shall be no merger of the interest or estate created by
         this Mortgage with any other interest or estate in the Property at any
         time held by or for the benefit of Lender in any capacity, without the
         written consent of Lender.

         Successors and Assigns. Subject to any limitations stated in this
         Mortgage on transfer of Grantor's interest, this Mortgage shall be
         binding upon and inure to the benefit of the parties, their successors
         and assigns. If ownership of the Property becomes vested in a person
         other than Grantor, Lender, without notice to Grantor, may deal with
         Grantor's successors with reference to this Mortgage and the
         indebtedness by way of forbearance or extension without releasing
         Grantor from the obligations of this Mortgage or liability under the
         indebtedness.

         Time is of the Essence. Time is of the essence in the performance of
         this Mortgage.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Mortgage. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Mortgage shall have the meanings
attributed to such terms in the Uniform Commercial Code:

                                       15
<PAGE>

         Borrower. The word "Borrower" means BADGER PAPER MILLS, INC., and all
         other persons and entities signing the Note in whatever capacity.

         Default. The word "Default" means the Default set forth in this
         Mortgage in the section titled "Default".

         Environmental Laws. The words "Environmental Laws" mean any and all
         state, federal and local statutes, regulations and ordinances relating
         to the protection of human health or the environment, including without
         limitation the Comprehensive Environmental Response, Compensation and
         Liability Act of 1980, as amended, 42 U.S.C. Section 9801, et seq.
         ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
         Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
         Act, 49 U.S.C. Section 1601, et seq., the Resource Conservation and
         Recovery Act, 42 U.S.C. Section 8901, et seq., or other applicable
         state or federal laws, rules or regulations adopted pursuant thereto.

         Event of Default. The words "Event of Default" mean any of the events
         of default set forth in this Mortgage in the events of default section
         of this Mortgage.

         Grantor. The word "Grantor" means BADGER PAPER MILLS, INC.

         Guaranty. The word "Guaranty" means the guaranty from guarantor,
         endorser, surety, or accommodation party to Lender, including without
         limitation a guaranty of all or part of the Note.

         Hazardous Substances. The words "Hazardous Substances" means materials
         that, because of their quantity, concentration or physical, chemical or
         infectious characteristics, may cause or pose a present or potential
         hazard to human health or the environment when improperly used,
         treated, stored, disposed of, generated, manufactured, transported or
         otherwise handled. The words "Hazardous Substances" are used in their
         very broadest sense and include without limitation any and all
         hazardous or toxic substances, materials or waste as defined by or
         listed under the Environmental Laws. The term "Hazardous Substances"
         also includes, without limitation, petroleum and petroleum by-products
         or any fraction thereof and asbestos.

         Improvements. The word "Improvements" means all existing and future
         improvements, buildings, structures, mobile homes affixed on the Real
         Property, facilities, additions, replacements and other construction on
         the Real Property.

         Indebtedness. The word "Indebtedness" means all principal, interest,
         and other amounts, costs and expenses payable under the Note or Related
         Documents, together with all renewals of, extensions of, modifications
         of, consolidations of and substitutions for the Note or Related
         Documents and any amounts expended or advanced by Lender to discharge
         Grantor's

                                       16
<PAGE>

         obligations or expenses incurred by Lender to enforce Grantor's
         obligations under this Mortgage, together with interest on such amounts
         as provided in this Mortgage.

         Lender. The word "Lender" means WISCONSIN COMMUNITY BANK, its
         successors and assigns.

         Mortgage. The word "Mortgage" means this Mortgage between Grantor and
         Lender.

         Note. The word "Note" means the promissory note dated September 19,
         2002, in the original principal amount of $2,000,000.00 from Grantor to
         Lender, together with all renewals of, extensions of, modifications of,
         refinancings of, consolidations of, and substitutions for the
         promissory note or agreement.

         Personal Property. The words "Personal Property" mean all equipment,
         fixtures, and other articles of personal property now or hereafter
         owned by Grantor, and now or hereafter attached or affixed to the Real
         Property; together with all accessions, parts, and additions to, all
         replacements of, and all substitutions for, any of such property; and
         together with all proceeds (including without limitation all insurance
         proceeds and refunds of premiums) from any sale or other disposition of
         the Property.

         Property. The word "Property" means collectively the Real Property and
         the Personal Property.

         Real Property. The words "Real Property" mean the real property,
         interests and rights, as further described in this Mortgage.

         Related Documents. The words "Related Documents" mean all promissory
         notes, credit agreements, loan agreements, environmental agreements,
         guaranties, security agreements, mortgages, deeds of trust, security
         deeds, collateral mortgages, and all other instruments, agreements and
         documents, whether now or hereafter existing, executed in connection
         with the indebtedness.

         Rents. The word "Rents" means all present and future rents, revenues,
         income, issues, royalties, profits, and other benefits derived from the
         Property.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS.

GRANTOR:

BADGER PAPER MILLS, INC.

By:  /s/ William H. Peters
   --------------------------
     WILLIAM H. PETERS, CFO, VP and Secretary of BADGER PAPER MILLS, INC.

                                       17
<PAGE>

                       This Mortgage prepared by:  x      /s/ Kevin S. Tenpas
                                                  ------------------------------
                                 Name of Signer:   KEVIN S. TENPAS, PRESIDENT

        Complete either Authentication Section or Acknowledgement Section

                                 AUTHENTICATION

Signature(s) of BADGER PAPER MILLS, INC. authenticated this _____ day of
________, 20__.

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

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

--------------------------------------------------------------------------------
Title:  Member State Bar of Wisconsin or _______________________________________
authorized under Section 706.06, Wis. Stats.

                            CORPORATE ACKNOWLEDGEMENT

STATE OF WISCONSIN         )
                           ) SS
COUNTY OF BROWN            )

On this 19th day of September, 2002, before me, the undersigned Notary Public,
personally appeared WILLIAM H. PETERS, CFO, VP and Secretary of BADGER PAPER
MILLS, INC., and known to me to be an authorized agent of the corporation that
executed the Mortgage and acknowledged the Mortgage to be the free and voluntary
act and deed of the corporation, by authority of its Bylaws or by resolution of
its board of directors, for the uses and purposes therein mentioned, and on oath
stated that he or she is authorized to execute this Mortgage and in fact
executed the Mortgage on behalf of the corporation.

By:      /s/ Wenda M. Roycraft              Residing at De Pere, WI
     -----------------------------
         Wenda Roycraft
Notary Public in and for the State of WI    My commission expires 11/28/04

                                       18SECOND AMENDMENT TO SENIOR SECURED REVOLVING CREDIT AGREEMENT

         THIS SECOND AMENDMENT TO SENIOR SECURED REVOLVING CREDIT AGREEMENT,
dated as of June 28, 2002 (the "Amendment"), is by and between MIDWEST EXPRESS
HOLDINGS, INC. (the "Borrower"), the lenders party hereto and U.S. BANK NATIONAL
ASSOCIATION, as Agent (the "Agent").

                                    RECITALS

         WHEREAS, the Borrower is party to that certain Senior Secured Revolving
Credit Agreement, dated as of August 31, 2001, by and among the Borrower, the
lenders party thereto (each, a "Lender" and collectively, the "Lenders") and the
Agent, as amended by the First Amendment to Senior Secured Revolving Credit
Agreement dated as of January 9, 2002 (as so amended, the "Credit Agreement");
and

         WHEREAS, Midwest Express Airlines, Inc., one of the Guarantors
("Airlines"), is entering into a Loan Agreement (the "Loan Agreement") with
Kreditanstalt fur Wiederaufbau (the "KfW"), as Lender thereunder, to finance
advance payments in connection with Airlines's purchase of certain Model 717-200
aircraft described therein (the "Aircraft") pursuant to Purchase Agreement No.
2371, dated as of September 28, 2001, and as may hereafter be amended and/or
supplemented from time to time, by and between Airlines and McDonnell Douglas
Corporation, a Maryland corporation (the "Manufacturer"), including all exhibits
thereto and all letter agreements then or thereafter entered into that by their
terms constitute part of such purchase agreement (the "Purchase Agreement"); and

         WHEREAS, in connection with the Loan Agreement, Rolls-Royce Deutschland
Ltd. & Co. KG ("RRD") is entering into a Guarantee Agreement (the "Loan
Guarantee") with KfW whereby, among other things, RRD will guarantee to KfW the
payment by Airlines of principal and interest due under the Loan Agreement in
accordance with the terms thereof; and

         WHEREAS, in connection with RRD's entry into the Loan Guarantee,
Airlines is entering into a Secured Reimbursement Agreement (the "Reimbursement
Agreement") with RRD providing, among other things, for the reimbursement by
Airlines to RRD of all amounts under the Loan Agreement that may become payable
by RRD to KfW under the Loan Guarantee; and

         WHEREAS, as security for the payment and performance of Airlines's
obligations (i) to RRD under the Reimbursement Agreement, (ii) to KfW under the
Loan Agreement, (iii) to RRD, as Collateral Agent (the "Collateral Agent") under
the RRD/KfW Security Agreement (as defined below), and (iv) to either of RRD or
KfW under any other Transaction Document (as defined in the Loan Agreement) and
otherwise, Airlines is entering into a Security Agreement (the "RRD/KfW Security
Agreement") with Collateral Agent, pursuant to which Airlines is granting to the
Collateral Agent, for its benefit and each of RRD and KfW, a continuing first
priority security interest in and to the "Released Collateral" as defined in
Exhibit A attached hereto (the "Released Collateral"); and
<PAGE>

         WHEREAS, the Borrower, the Agent and the Lenders party hereto desire to
further amend the Credit Agreement as set forth herein.

         IN CONSIDERATION of the mutual covenants, conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed that:

                                    ARTICLE I

                                   DEFINITIONS

         Capitalized terms used in this Amendment but not defined herein shall
have the definitions assigned in the Credit Agreement.

                                   ARTICLE II

                                   AMENDMENTS

         The Credit Agreement is amended as follows:

         2.1 Section 1.1 - Definitions. The definition of "Required Lenders"
contained in Section 1.1 is amended by deleting the "51%" contained therein and
inserting "100%" in its place.

         2.1 Section 2.1 - Revolving Loans. Section 2.1 of the Credit Agreement
is amended in by deleting the amount "FIFTY-FIVE MILLION DOLLARS ($55,000,000)"
contained therein and inserting "FORTY-FIVE MILLION DOLLARS ($45,000,000)" in
its place.

         2.2 Schedule 2.1(a) - Commitments. Schedule 2.1(a) to the Credit
Agreement is replaced by Schedule 2.1(a) attached to this Amendment.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         The Borrower hereby represents and warrants to the Agent and the
Lenders that:

         3.1 Credit Agreement. All of the representations and warranties made by
the Borrower in the Credit Agreement are true and correct on the date of this
Amendment. No Default or Event of Default under the Credit Agreement has
occurred and is continuing as of the date of this Amendment.

         3.2 Authorization; Enforceability. The making, execution and delivery
of this Amendment, and performance of and compliance with the terms of the
Credit Agreement, as amended, have been duly authorized by all necessary
corporate action by the Borrower. This Amendment is the valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.

                                      -2-
<PAGE>

         3.3 Absence of Conflicting Obligations. The making, execution and
delivery of this Amendment, and performance of and compliance with the terms of
the Credit Agreement, as amended, do not violate any presently existing
provision of law or the articles of incorporation or bylaws of the Borrower or
any agreement to which the Borrower is a party or by which it is bound.

         3.4 Purchase Agreement. All of the representations and warranties of
Airlines regarding the Purchase Agreement made in that certain letter of even
date herewith from Airlines and addressed to the Lenders (the "Purchase
Agreement Letter") are true and correct.

                                   ARTICLE IV

                                  MISCELLANEOUS

         4.1 Continuance of Credit Agreement. Except as specifically amended by
this Amendment, the Credit Agreement shall remain in full force and effect.

         4.2 Survival. All agreements, representations and warranties made in
this Amendment or in any documents delivered pursuant to this Amendment shall
survive the execution of this Amendment and the delivery of any such document.

         4.3 Governing Law. This Amendment shall be governed by the laws of the
State of Wisconsin.

         4.4 Counterparts; Headings. This Amendment may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement. Article and Section
headings in this Amendment are inserted for convenience of reference only and
shall not constitute a part hereof.

         4.5 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or affecting the
validity or enforceability of such provision in any other jurisdiction.

         4.6 Effectiveness. This Amendment shall be effective upon the
satisfaction of the following conditions:

         (a) receipt by the Agent of this Amendment executed by the Borrower;

         (b) execution and delivery to the Agent of a Reaffirmation of Guarantor
by the Guarantors;

         (c) execution and delivery to the Lenders of the Purchase Agreement
Letter by Airlines; and

         (d) such additional supporting documents and materials as the Agent or
Lenders may reasonably request.

                                      -3-
<PAGE>

         4.7 Collateral Release. The Lenders authorize the Agent to release its
security interest in the Released Collateral pursuant to a Release substantially
in the form of Exhibit A attached hereto.

                            [signature page follows]

                                      -4-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Senior Secured Revolving Credit Agreement as of the day and year
first written above.

                                           MIDWEST EXPRESS HOLDINGS, INC.

                                           By: /s/ Robert S. Bahlman
                                               ---------------------------------
                                           Title: CFO
                                                  ------------------------------

                                           U.S. BANK NATIONAL
                                           ASSOCIATION, in its
                                           capacity as Agent and as a
                                           Lender

                                           By: /s/ [Authorized Representative]
                                               ---------------------------------
                                           Title: Assistant Vice President
                                                  ------------------------------

                                           M&I MARSHALL & ILSLEY BANK

                                           By:  /s/ [Authorized Representative]
                                               ---------------------------------
                                           Title:  Vice President
                                                  ------------------------------

                                           Attest:/s/[Authorized Representative]
                                                  ------------------------------
                                           Title: Vice President
                                                  ------------------------------

                                           BANK ONE, NA (Main Office Chicago)

                                           By: /s/ [Authorized Representative]
                                               ---------------------------------
                                           Title: Officer
                                                  ------------------------------

                                      -5-
<PAGE>
                            REAFFIRMATION OF GUARANTY

        Each of the undersigned (each a "Guarantor") executed a Subsidiary
Guaranty (each a "Guaranty") dated as of August 31, 2001 in favor of the Lenders
(as defined in each Guaranty) pursuant to which each Guarantor guaranteed
certain obligations owed by Midwest Express Holdings, Inc. (the "Borrower") to
the Lenders, including, without limitation, all debts, liabilities, obligations,
covenants and agreements of the Borrower in that certain Senior Secured
Revolving Credit Agreement, dated as of August 31, 2001 (the "Credit
Agreement"), by and between the Borrower, the Lenders and U.S. Bank National
Association, d/b/a Firstar Bank, N.A. as Agent for the Lenders, and related
agreements, as amended. Each Guarantor acknowledges the Second Amendment to
Senior Secured Revolving Credit Agreement and hereby agrees that it shall remain
liable under its Guaranty for all amounts owed pursuant to the Credit Agreement,
as amended by the Amendment, and the related agreements.

        June 28, 2002.

                                  MIDWEST EXPRESS AIRLINES, INC.

                                  By: /s/ Robert S. Bahlman
                                      ------------------------------------------
                                  Title:  CFO
                                         ---------------------------------------

                                  ASTRAL AVIATION, INC.

                                  By:  /s/ Robert S. Bahlman
                                      ------------------------------------------
                                  Title:  CFO
                                         ---------------------------------------

                                  MIDWEST EXPRESS SERVICES - OMAHA, INC.

                                  By: /s/ Robert S. Bahlman
                                      ------------------------------------------
                                  Title:  President
                                         ---------------------------------------

                                  MIDWEST EXPRESS SERVICES - KANSAS CITY, INC.

                                  By:  /s/ Robert S. Bahlman
                                      ------------------------------------------
                                  Title:  President
                                         ---------------------------------------

                                  YX PROPERTIES, LLC

                                  By: /s/ Robert S. Bahlman
                                      ------------------------------------------
                                  Title:  President
                                         ---------------------------------------

                                      -6-
<PAGE>
                                    EXHIBIT A

                                     RELEASE

RELEASE, dated as of June __, 2002 (this "Release"), by U.S. Bank National
Association, d/b/a Firstar Bank, N.A., as Agent (the "Agent"), in favor of
Midwest Express Holdings, Inc., a Wisconsin corporation ("MWEH"), Midwest
Express Airlines, Inc., a Wisconsin corporation ("MWE"), Rolls-Royce Deutschland
Ltd. & Co. KG ("RRD"), on behalf of itself and in its capacity as Collateral
Agent under the RRD/KfW Security Agreement (as defined below), Kreditanstalt fur
Wiederaufbau (the "KfW"), and their respective successors and assigns, including
their transferees.

WHEREAS, the Agent, MWEH and the lenders signatory to the Credit Agreement (as
defined below) from time to time (the "Credit Lenders"), are parties to that
certain Senior Secured Revolving Credit Agreement, dated as of August 31, 2001
(as amended, modified or supplemented from time to time, the "Credit
Agreement"); and

WHEREAS, the obligations of MWEH under the Credit Agreement are secured by a
security interest granted pursuant to that certain Subsidiary Security
Agreement, dated as of August 31, 2001 (the "Revolver Security Agreement"), by
and among the Agent, for itself and as agent for each of the Benefited Parties
thereunder (in such capacity, the "Security Agent"), and various subsidiaries of
MWEH, including but not limited to MWE; and

WHEREAS, MWE is entering into a Loan Agreement (the "Loan Agreement") with KfW,
as Lender thereunder, to finance advance payments in connection with MWE's
purchase of certain Model 717-200 aircraft described therein (the "Aircraft")
pursuant to Purchase Agreement No. 2371, dated as of September 28, 2001, and as
may hereafter be amended and/or supplemented from time to time, by and between
MWE and McDonnell Douglas Corporation, a Maryland corporation (the
"Manufacturer"), including all exhibits thereto and all letter agreements then
or thereafter entered into that by their terms constitute part of such purchase
agreement (the "Purchase Agreement"); and

WHEREAS, in connection with the Loan Agreement, RRD is entering into a Guarantee
Agreement (the "Loan Guarantee") with KfW whereby, among other things, RRD will
guarantee to KfW the payment by MWE of principal and interest due under the Loan
Agreement in accordance with the terms thereof; and

WHEREAS, in connection with RRD's entry into the Loan Guarantee, MWE is entering
into a Secured Reimbursement Agreement (the "Reimbursement Agreement") with RRD
providing, among other things, for the reimbursement by MWE to RRD of all
amounts under the Loan Agreement that may become payable by RRD to KfW under the
Loan Guarantee; and

WHEREAS, as security for the payment and performance of MWE's obligations (i) to
RRD under the Reimbursement Agreement, (ii) to KfW under the Loan Agreement,
(iii) to RRD, as Collateral Agent (the "Collateral Agent") under the RRD/KfW
Security

<PAGE>

Agreement (as defined below), and (iv) to either of RRD or KfW under any other
Transaction Document (as defined in the Loan Agreement) and otherwise, MWE is
entering into a Security Agreement (the "RRD/KfW Security Agreement") with
Collateral Agent, pursuant to which MWE is granting to the Collateral Agent, for
its benefit and each of RRD and KfW, a continuing first priority security
interest in and to the collateral set forth on Schedule A hereto (the "Released
Collateral").

NOW THEREFORE, the Security Agent hereby agrees as follows:

1. Release. The Security Agent, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, does hereby agree that:

(a) the Security Agent has relinquished, disclaimed, released and terminated any
of its right, title and interest in, to or under the Released Collateral; and

(b) the Released Collateral is irrevocably released from any lien, security
interest, assignment, mortgage, pledge or other encumbrance or claim in favor of
the Security Agent or any Credit Lender.

2. Form UCC-3. The Security Agent agrees to deliver to the Collateral Agent the
Uniform Commercial Code release statements set forth on Schedule B hereto. The
Security Agent further agrees to furnish additional reassignments, terminations
and releases and such other and further documents and instruments as may
reasonably be requested in order to effect and evidence more fully the matters
covered by this Release.

3. Authority. The Security Agent represents and warrants that the Security Agent
has full power and authority to enter into this Release and all consents and
approvals necessary for the execution and delivery by the Security Agent of this
Release have been duly obtained, taken or made and are in full force and effect.

4. Further Assurances. The Security Agent agrees, to the extent not already done
and at the expense of the Borrower, to take, with reasonable diligence, any
other reasonable actions which may be requested by the Collateral Agent to
effect and evidence of record the foregoing.

5. Effectiveness. This Agreement shall become effective on and as of the date
hereof when executed by the Security Agent.

6. Choice of Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE
OF [WISCONSIN] AND THE VALIDITY OF THIS AGREEMENT AND THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THE RIGHTS OF THE PARTIES THERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF [WISCONSIN].

7. Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each

<PAGE>

of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

8. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purposes.

                           [signature pages to follow]

<PAGE>

IN WITNESS WHEREOF, this Release has been duly executed on behalf of the
undersigned by a duly authorized officer as of the date first written above.

                                     U.S. BANK NATIONAL
                                     ASSOCIATION, d/b/a FIRSTAR
                                     BANK, N.A., as Agent and
                                     Security Agent

                                     By:_________________________________
                                     Name:
                                     Title:

                                     By:_________________________________
                                     Name:
                                     Title:

<PAGE>
                                   SCHEDULE A

                               Released Collateral

         1. All of MWE's right, title and interest which it now has or hereafter
may have in, to and under the Purchase Agreement and all Proceeds (as defined in
the Uniform Commercial Code) thereof, including:

(a) the right upon valid tender by the Manufacturer to purchase the Aircraft
pursuant to the terms and conditions of the Purchase Agreement (including the
right to accept delivery of the Aircraft), the right to take title to the
Aircraft and to be named the purchaser in the bills of sale to be delivered by
the Manufacturer for the Aircraft pursuant to the Purchase Agreement, and any
other rights, title or interest of MWE in or to the Aircraft;

(b) the right to transfer the right, title and interest of MWE in and to the
Purchase Agreement or in any Aircraft, in part or as an entirety;

(c) all claims for damages in respect of such Aircraft arising as a result of
any default by the Manufacturer under the Purchase Agreement;

(d) any and all rights of MWE to compel performance of the terms of the Purchase
Agreement in respect of the Aircraft;

(e) the benefit of any deposits or advance payments received by the Manufacturer
under the Purchase Agreement (whether financed by a Loan under and as defined in
the Loan Agreement, or paid by MWE from its own funds, or otherwise), and all
rights of MWE to receive payments, credits, rebates or monies refunded by the
Manufacturer thereunder or under that certain Consent to Assignment executed by
the Manufacturer as Seller under and as defined in the Purchase Agreement;

(f) all rights of MWE to exercise any election or option, or to make any
decision or determination, or to give any notice, consent, waiver or approval
thereunder or in respect thereof; and

(g) all Proceeds of any of the foregoing.

         2. All of MWE's right, title and interest which it now has or hereafter
may have in, to and under any of the Transaction Documents. For purposes of this
Schedule A, the "Transaction Documents" means any or all of the Loan Agreement,
the Reimbursement Agreement, the RRD/KfW Security Agreement, the Notice of and
Consent to Assignment, and all other agreements, documents and certificates
relating to MWE's obligations under any of the foregoing, or that are required
to be delivered under any of the foregoing.

<PAGE>

                                   SCHEDULE B

<TABLE>

                            UCC Financing Statements
                            ------------------------

<CAPTION>
ITEM    TERMINATE      UCC-1     SECURED         DEBTOR      FILING NO.     UCC-3      UCC-3     PLACE OF
        ("T") /        FILING    PARTY                                      FILING     TYPE OF   FILING
        PARTIAL        DATE                                                 DATE       FILING
        RELEASE ("R")
----------------------------------------------------------------------------------------------------------
<C>     <C>            <C>       <C>             <C>         <C>            <C>        <C>       <C>
1       R              09/26/01  U.S. Bank       Midwest     010005202514              Partial   Wisconsin
                                 National        Express                               Release   Department
                                 Association     Airlines,                                       of
                                                 Inc.                                            Financial
                                                                                                 Institutions

2       R              09/27/01  U.S. Bank       Midwest     0002096521                Partial   Connecticut
                                 National        Express                               Release   UCC
                                 Association     Airlines,                                       Commercial
                                                 Inc.                                            Recording
                                                                                                 Division

3       R              09/27/01  U.S. Bank       Midwest     200100209175              Partial   Florida
                                 National        Express                               Release   Secretary
                                 Association     Airlines,                                       of State
                                                 Inc.

</TABLE>

<PAGE>
                                 SCHEDULE 2.1(a)

                     REVOLVING COMMITMENTS, LOC COMMITMENTS

                      and SWING LINE COMMITMENT PERCENTAGES

<TABLE>
<CAPTION>

                                   Revolving Commitment Amount        Revolving Commitment Percentage
<S>                                                <C>                                      <C>
U.S. Bank National Association                     $21,681,810                               48.1818%
M&I Marshall & Ilsley Bank                         $16,772,715                               37.2727%
Bank One, NA                                        $6,545,475                               14.5455%
             Totals                                $45,000,000                              100.0000%

<CAPTION>

                                         LOC Commitment Amount              LOC Commitment Percentage
<S>                                                <C>                                      <C>
U.S. Bank National Association                     $12,045,450                               48.1818%
M&I Marshall & Ilsley Bank                          $9,318,175                               37.2727%
Bank One, NA                                        $3,636,375                               14.5455%
             Totals                                $25,000,000                              100.0000%

</TABLE>

<PAGE>

                                              Swing Line Commitment Percentage
U.S. Bank National Association                                        48.1818%
M&I Marshall & Ilsley Bank                                            37.2727%
Bank One, NA                                                          14.5455%
                                 Totals                              100.0000%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]