THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amendment to Amended and Restated Credit Agreement (the
"Amendment") dated as of September 12, 2000 (but effective as of August 14,
2000), by and between Badger Paper Mills, Inc. (individually and as successor by
merger to Badger Paper Mills Flexible Packaging Division, Inc.) (the
"Borrower"), the Lenders, and Harris Trust and Savings Bank, as Agent (the
"Agent"); W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and Harris Trust and Savings Bank, as
Agent, have heretofore executed and delivered an Amended and Restated Credit
Agreement dated as of January 29, 1999, as previously amended by that certain
First Amendment to Amended and Restated Credit Agreement dated as of August 31,
1999 and that certain Second Amendment to Amended and Restated Credit Agreement
dated as of March 9, 2000 (said Amended and Restated Credit Agreement as so
amended being referred to herein as the "Credit Agreement"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
provided herein;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Credit Agreement shall be and hereby is amended effective as of August 14, 2000
as follows:
ARTICLE 1
AMENDMENTS
1.1 Sections 7.6, 7.8 and 7.12 of the Credit Agreement shall each be
amended in its entirety and as so amended shall be restated to read as follows:
Section 7.6. Fixed Charge Coverage Ratio. Badger shall
not, as of the last day of each fiscal month of Badger ending
during each of the periods specified below, permit the ratio of
(x) EBITDA for the twelve fiscal months of Badger then ended
minus Capital Expenditures during such period to (y) Fixed
Charges for the same twelve fiscal months then ended to be less
than:
FIXED CHARGE
COVERAGE RATIO
SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING LESS THAN:
June 30, 2001 September 29, 2001 1.00 to 1.00
September 30, 2001 At all times thereafter 1.15 to 1.00
<PAGE>
Section 7.8. Leverage Ratio. Badger will not, as of the
last day of each fiscal month of Badger ending during the
periods specified below, permit the Leverage Ratio to be more
than:
LEVERAGE RATIO
SHALL NOT BE
FROM AND INCLUDING TO AND INCLUDING MORE THAN:
June 30, 2001 September 29, 2001 4.00 to 1.00
September 30, 2001 At all times thereafter 3.75 to 1.00
Section 7.12.Capital Expenditures. Badger will not, nor
will it permit any Subsidiary to, expend or become obligated
for Capital Expenditures in an aggregate amount for Badger and
the Subsidiaries in excess of the following:
Fiscal Year 2000.................................. $2,500,000
Fiscal Year 2001.................................. $2,700,000
and each fiscal year thereafter
1.2 Section 7 of the Credit Agreement shall be amended by adding thereto
a new Section 7.24 which reads as follows:
"Section 7.23. Minimum EBITDA. Badger shall not, as of the
last day of each calendar month specified below, permit EBITDA
for the period commencing on July 1, 2000 to and including the
last day of such calendar month to be less than the amount
specified below:
CALENDAR MONTH EBITDA SHALL NOT BE LESS THAN:
July, 2000 ($145,000)
August, 2000 $210,000
September, 2000 $645,000
October, 2000 $1,080,000
November, 2000 $1,515,000
December, 2000 $1,940,000
<PAGE>
January, 2001 $2,290,000
February, 2001 $2,640,000
March, 2001 $3,000,000
April, 2001 $3,350,000
May, 2001 $3,700,000
June, 2001 $4,050,000
1.3 The definition of each of "Consolidated Net Income", "EBITDA" and
"Eurodollar Margin" appearing in Section 10 of the Credit Agreement are hereby
amended in their respective entireties and as so amended shall be restated to
read as follows:
"Consolidated Net Income" means, with reference to any
period, the net income (or net loss) of Badger and its
Consolidated Subsidiaries for such period as computed on a
consolidated basis in accordance with generally accepted
accounting principles, and, without limiting the foregoing,
after deduction from gross income of all expenses and
reserves, including reserves for all taxes on or measured by
income, but excluding any extraordinary profits and losses,
also excluding any taxes on such extraordinary profits and
any gains or losses on the Borrowers' Marketable Securities.
"EBITDA" means, with reference to any period, Consolidated
Net Income for such period plus all amounts deducted in
arriving at such Consolidated Net Income amount in respect
of (i) Interest Expense for such period, plus (ii) federal,
state and local income taxes for such period, plus (iii) all
amounts properly charged for depreciation of fixed assets
and amortization of intangible assets during such period on
the books of the Borrowers and their Subsidiaries; provided,
however, that the foregoing calculation of EBITDA shall
exclude the amount actually incurred by Badger (but in no
event to exceed $50,000) during its fiscal year 2000 in
connection with severance paid by Badger to its former
employees.
"Eurodollar Margin" means
(i) 1.25% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
<PAGE>
preceding such Pricing Period shows a Leverage Ratio of less
than 2.25 to 1.00;
(ii) 1.50% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
preceding such Pricing Period shows a Leverage Ratio of
greater than or equal to 2.25 to 1.00 and less than 2.75 to
1.00;
(iii) 1.75% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
preceding such Pricing Period shows a Leverage Ratio greater
than or equal to 2.75 to 1.00 but less than 3.25 to 1.00;
(iv) 2.25% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
preceding such Pricing Period shows a Leverage Ratio greater
than or equal to 3.25 to 1.00 but less than 3.75 to 1.00;
(v) 2.75% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
preceding such Pricing Period shows a Leverage Ratio greater
than or equal to 3.75 to 1.00 but less than 4.75 to 1.00;
and
(vi) 3.25% for any Pricing Period the Compliance
Certificate delivered by Badger for the second fiscal month
preceding such Pricing Period shows a Leverage Ratio greater
than or equal to 4.75 to 1.00 or for which Badger has not
delivered a Compliance Certificate as required by Section
7.6 hereof.
1.4 Section 10 of the Credit Agreement is hereby amended by adding
thereto the following new definition:
"Change of Control" means any of (a) the acquisition by
any "person" or "group" (as such terms are used in
sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) at any time of beneficial ownership of
50% or more of the outstanding capital stock of Badger on
a fully-diluted basis, or (b) the failure of individuals
who are members of the board of directors of Badger on
August 14, 2000 (together with any new or replacement
directors whose initial nomination for election was
approved by a majority of the directors who were either
directors on August 14, 2000 or previously so approved) to
constitute a majority of the board of directors of Badger.
<PAGE>
1.5 Section 8.1 of the Credit Agreement is hereby amended by (i)
striking the word "or" appearing at the end of Subsection (k) thereof, (ii)
striking the period appearing at the end of Subsection (l) thereof and
substituting therefor the word "or" and (iii) adding thereto a new Subsection
(k) which reads as follows:
(k) a Change of Control shall occur.
ARTICLE II
RELEASE OF INVESTMENT ACCOUNT
2.1 The Borrower has requested the Bank to release the lien on the
Borrower's investment account number 15-029661-1-CR13 maintained with Robert W.
Baird & Co. granted to the Bank pursuant to that certain Security Agreement Re:
Investment Account dated as of December 31, 1994 (the "Security Agreement Re:
Investment Account"), from the Borrower to the Bank. Accordingly, upon
satisfaction of the conditions precedent set forth in Article III hereof, the
Bank hereby releases the lien granted pursuant to the Security Agreement Re:
Investment Account.
ARTICLE III
WAIVER
3.1 The Borrower has informed the Bank that it was not in compliance
with Section 7.6 of the Credit Agreement for each of the fiscal months ending
April 30, 2000, May 31, 2000, June 30, 2000 and July 31, 2000, and was not in
compliance with Section 7.8 of the Credit Agreement for each of the fiscal
months ending on May 31, 2000, June 30, 2000 and July 31, 2000 (collectively,
the "Existing Defaults"). The Borrower has requested that the Bank waive the
Existing Defaults. Accordingly, the Bank hereby waives the Existing Defaults;
provided, however, that the waiver contained in this Article III is limited to
the matters set forth herein, and the Borrower agrees that it remains obligated
to comply with the terms of the Credit Agreement and the other Loan Documents,
including Sections 7.6 and 7.8 of the Credit Agreement and that the Bank shall
not be obligated in the future to waive any provision of the Credit Agreement or
the other Loan Documents.
ARTICLE IV
CONDITIONS PRECEDENT
3.1 This Amendment shall become effective as of August 14, 2000 on the
date that each of the following conditions precedent have been met:
(a) the Agent shall have received counterparts hereof
executed by the Borrower and the Required Lenders;
(b) the Agent shall have received (i) a certificate of
the Secretary of the Borrower dated the date of this
Amendment certifying that attached thereto is a true and
<PAGE>
complete copy of resolutions adopted by the Board of
Directors of the Borrower, authorizing the execution,
delivery and performance of this Amendment and certifying
the names and true signatures of the officers of the
Borrower authorized to sign this Amendment and (ii) such
supporting documents as the Agent may reasonably request;
(c) the Agent shall have received for its own account
an amendment fee in an amount equal to $80,000; and
(d) not later than 21 days following the date of this
Amendment, Agent shall have received fully executed
landlord's waivers for each of the Borrower's leased
collateral locations including without limitation the
locations known as K&K Warehouse, 3100 Woleske Road,
Marinette, Wisconsin 54143 and McDermid Warehousing, 160
Hanks Marks Drive, P.O. Box 121, Oconto Falls, Wisconsin
54154, each in form and substance satisfactory to the Agent
and its counsel.
Upon satisfaction of the conditions set forth in Article III hereof, this
Amendment shall become effective as of August 14, 2000.
ARTICLE V
MISCELLANEOUS
4.1. To induce the Agent and the Banks to enter into this Amendment, the
Borrower represents and warrants to the Agent and the Banks that: (a) the
representations and warranties contained in the Loan Documents, as amended by
the Amendment, are true and correct in all material respects as of the date
hereof with the same effect as though made on the date hereof; (b) after giving
effect to this Amendment, no Event of Default or Default exists; (c) this
Amendment has been duly authorized by all necessary corporate proceedings and
duly executed and delivered by the Borrower, and the Credit Agreement, as
amended by the Amendment, and each of the other Credit Documents are the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity; and (d) no consent, approval, authorization, order, registration or
qualification with any governmental authority is required for, and in the
absence of which would adversely effect, the legal and valid execution and
delivery or performance by any Borrower of this Amendment or the performance by
the Borrower of the Credit Agreement, as amended by the Amendment, or any other
Credit Document to which they are a party.
4.2. The Borrower acknowledges and agrees that all of the Collateral
Documents to which it is a party remain in full force and effect for the benefit
and security of, among other things, the Obligations as modified hereby. The
Borrower further acknowledges and agrees that
<PAGE>
the Borrower's obligations owing under the Applications and the Letters of
Credit shall constitute Secured Obligations as defined under the Collateral
Documents. Nothing herein contained shall in any manner affect or impair the
priority of the liens and security interests created and provided for by the
Collateral Documents as to the indebtedness which would be secured thereby prior
to giving effect to this Amendment. The Borrower further agrees to execute and
deliver any and all instruments or documents as may be required by the Lenders
to confirm any of the foregoing.
4.3. This Amendment may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same Amendment.
4.4. Except as specifically provided above, the Credit Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed in all respects. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of the Agent or any Bank
under the Credit Agreement or any of the other Loan Documents, nor constitute a
waiver or modification of any provision of any of the other Loan Documents.
4.5. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
Dated as of the date first above written.
BADGER PAPER MILLS, INC.
By: /s/
----------------------------------
Title:
----------------------------------
Accepted and agreed to as of the date and year first above written.
HARRIS TRUST AND SAVINGS BANK,
individually and as Agent
By: /s/
----------------------------------
Title:
----------------------------------
