Face of Note
CUSIP No:
15% Series B Senior Secured Discount Notes due 2007
No. 1 $35,755,788
MIDDLE AMERICAN TISSUE INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of Thirty
Five Million Seven Hundred Fifty Five Thousand Seven Hundred and Eighty Eight
Dollars on July 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Dated:
MIDDLE AMERICAN TISSUE INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
(SEAL)
Certificate of Authentication:
This is one of the Global Notes referred to in the within-mentioned Indenture:
THE CHASE MANHATTAN BANK
By:
------------------------------
Authorized Signatory
Dated:
A-3 [THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THIS INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),
TO HOLDINGS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS SECURITY IS
BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF
THIS SECURITY, (1) THE ISSUE PRICE IS $447.48; (2) THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $1,152.52; (3) THE ISSUE DATE IS JULY 9, 1999; AND (4) THE YIELD TO
MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 18.385%.
(Back of Note)
15% Series B Senior Secured Discount Notes due 2007
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Middle American Tissue Inc., a Delaware corporation
("Holdings"), promises to pay cash interest on the principal amount of this Note
at 15% per annum from July 9, 1999 until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. Holdings will pay interest and Liquidated Damages,
if any, semi-annually on January 15 and July 15 of each year commencing on
January 15, 2004, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from July 15, 2003; provided that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date. Interest on this Note shall accrete from the date of issuance
until July 15, 2003 at the rate of 15% per annum, compounded semi-annually.
Holdings shall pay interest (including Accrued Bankruptcy Interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 2% per annum in excess of the rate
then in effect; it shall pay interest (including Accrued Bankruptcy Interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. Holdings will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the January 1 or July 1 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture (as defined below) with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of Holdings maintained for such
purpose within or without the City and State of New York, or, at the option of
Holdings, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on all Global Notes and all other Notes the Holders of more than $1,000
in aggregate principal amount of Notes which shall have provided wire transfer
instructions to Holdings or the Paying Agent. Such payment shall be in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Chase Manhattan Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. Holdings
may change any Paying Agent or Registrar without notice to any Holder. Holdings
or any of its Subsidiaries may act in any such capacity.
4. Indenture. Holdings issued the Notes under an Indenture dated as of July
9, 1999 ("Indenture") between Holdings and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
secured obligations of Holdings limited to $35,755,788 in aggregate face amount.
5. Optional Redemption. Holdings may redeem the Notes as follows:
(a) At any time on or after the first anniversary of the Issue
Date and on or prior to the second anniversary of the Issue Date, in
whole but not in part, upon not less than 30 nor more than 60 days'
notice, at the Year Two Redemption Price. The "Year Two Redemption
Price" shall equal 105% of Accreted Value as of the date of
redemption, plus Liquidated Damages, if any, thereon to the date of
redemption.
(b) At any time on or after July 15, 2003, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of Accreted Value) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed after July 15
of each of the years indicated below:
Date Percentage
---- ----------
2003................................................ 107.5%
2004................................................ 105.0%
2005................................................ 102.5%
2006 and thereafter................................. 100.000%
In addition, on or prior to July 15, 2002, Holdings may, at its option on
any one or more occasions, redeem up to 35% of the aggregate principal amount of
Notes originally issued under this Indenture, with the proceeds of one or more
Equity Offerings, at a redemption price equal to 115% of the Accreted Value
thereof, plus Liquidated Damages, if any, thereon to the date of redemption;
provided that at least 65% of the aggregate principal amount of Notes originally
issued under this Indenture would remain outstanding immediately after giving
effect to any such redemption.
6. Mandatory Redemption. Upon receipt of a notice from DLJMB pursuant to
Section 4.3(a) of the Stockholders Agreement stating that DLJMB is exercising
its option thereunder. Unless DLJMB withdraws such option in accordance with the
terms of the Stockholders Agreement, Holdings shall be required to redeem all,
but not less than all, of the Notes at the Year Two Redemption Price. Any such
redemption shall be effected no later than October 9, 2002.
7. Repurchase Offers.
(a) Change of Control Offer. Upon the occurrence of a Change of
Control, Holdings shall offer to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer")
at an offer price in cash equal to 101% of Accreted Value (or, if
after July 15, 1999, 101% of the aggregate principal amount thereof
plus accrued and unpaid interest thereon) and, in each case,
Liquidated Damages, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control,
Holdings shall mail a notice to each Holder describing the transaction
or transactions that constitute the Change of Control and offering to
repurchase Notes pursuant to the procedures required by the Indenture
and described in such notice. Holdings shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control.
(b) Asset Sale Offer. Holdings will not engage in any Asset
Sales. Holdings will not permit any of its Subsidiaries to engage in
an Asset Sale unless:
(1) the Subsidiary receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced in each case by a
resolution of the board of directors of such entity set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests sold or otherwise disposed of in such Asset Sale;
(2) at least 80% of the consideration therefor received by such
Subsidiary is in the form of cash or Cash Equivalents; provided that each
of the following shall be deemed to be cash for purposes of this provision:
(a) the amount of any liabilities (as shown on such Subsidiary's
most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables) of any Subsidiary (other
than liabilities that are by their terms subordinated to, or equal in
right of payment with, the Notes) that are assumed by the transferee
of any such assets; and
(b) any securities, notes or other obligations received by any
Subsidiary from such transferee that are converted by such Subsidiary
into cash within 60 days; or
(3) such Subsidiary applies the Net Proceeds as provided in the
following paragraph.
The applicable Subsidiary may, at its option, apply any such Net Proceeds
within 360 days of the related Asset Sale as follows:
(a) to the acquisition of another business or the acquisition of
other long-term assets, in each case, in the same or a similar,
complementary, ancillary or related line of business as any of
Holdings' Subsidiaries was engaged in on the Issue Date or any
reasonable extensions or expansions thereof ("Replacement Assets"); or
(b) to the repayment of Indebtedness of any Subsidiary of
Holdings.
If such Subsidiary does not use any portion of the Net Proceeds as
described above within such 360-day period and if such unused portion of the Net
Proceeds is not required to be held as collateral under the Company's Indenture,
such unused portion of the Net Proceeds period shall constitute "Excess
Proceeds" subject to disposition as provided below. When the aggregate amount of
Excess Proceeds exceeds $10.0 million, Holdings will be required to cause such
Subsidiary make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
aggregate amount of Excess Proceeds. The offer price of any Asset Sale Offer
will be equal to 100% of Accreted Value, plus accrued and unpaid interest, if
any, and Liquidated Damages, if any, thereon to the date of purchase, and will
be payable in cash in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, remaining Excess Proceeds shall be
released to the Subsidiary and may be used for general corporate purposes. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
8. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and Holdings may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. Holdings need not exchange or
register the transfer of any Note or portion of a Note selected for redemption,
except for the unredeemed portion of any Note being redeemed in part. Also, it
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be treated as
its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing Default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under this Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA.
Notwithstanding the foregoing, Collateral may be released with the consent
of the Holders of at least 75% in aggregate principal amount of the then
outstanding Notes in addition to releases of Collateral expressly permitted by
the Collateral Documents.
11. Defaults and Remedies. Each of the following constitutes an Event of
Default under the Indenture:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes;
(2) default in payment when due of the Accreted Value or the principal
of or premium, if any, on the Notes;
(3) failure by Holdings or any of its Subsidiaries to comply with the
provisions described in Section 4.03, 4.04, 4.05 or 4.06 of the Indenture;
(4) continuance of a default in the performance, or breach, of any
other covenant or warranty of Holdings in the Indenture for a period of 30
days after there has been given to Holdings by the Trustee, or to Holdings
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Notes, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder;
(5) default under any mortgage, security agreement, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Holdings or any of its
Significant Subsidiaries (or the payment of which is guaranteed by Holdings
or any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness, after the expiration of any
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or
more;
(6) failure by Holdings or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, default by Holdings in the
performance of the Securities Pledge Agreement which adversely affects the
enforceability or the validity of the Trustee's Lien on the Collateral or
which adversely affects the condition or value of the Collateral, taken as
a whole, in any material respect, repudiation or disaffirmation by Holdings
of its obligations under the Securities Pledge Agreement or the
determination in a judicial proceeding that the Securities Pledge Agreement
is unenforceable or invalid against Holdings for any reason; and
(8) certain events of bankruptcy or insolvency with respect to
Holdings or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to Holdings, any Significant Subsidiary or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. In addition to acceleration of the Notes, if an Event of
Default occurs and is continuing, the Trustee will have the right to exercise
remedies with respect to the Collateral as are available under the Indenture and
the Securities Pledge Agreement and at law. Holders of the Notes may not enforce
the Indenture or the Notes or exercise remedies with respect to the Collateral
except as expressly provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, the Notes and the Securities Pledge Agreement, except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Notes.
Holdings is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and Holdings is required upon becoming
aware of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
12. Ranking and Security. The Notes will be senior obligations of Holdings
and will rank equal in right of payment with all existing and future
unsubordinated Indebtedness of Holdings and senior in right of payment to any
Indebtedness of Holdings that is subordinated to the Notes.
13. Trustee Dealings with Holdings. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for Holdings or its Affiliates, and may otherwise deal with Holdings or its
Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, of Holdings, as such, shall not have any liability for any
obligations of Holdings under the Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Notes. In addition
to the rights provided to Holders of Notes under the Indenture, Holders of
Transferred Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between
Holdings and the Initial Purchasers (the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Holdings has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
Holdings will furnish to any Holder upon written request and without charge
a copy of the Indenture, the Securities Pledge Agreement and/or the Registration
Rights Agreement. Requests may be made to:
Middle American Tissue Inc.
135 Engineers Road
Hauppauge, New York 11788
Attention: Chief Financial Officer
Telephone No.: (516) 435-9000
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably
appoint_____________________________________________________________ to transfer
this Note on the books of Holdings. The agent may substitute another to act for
him.
Date:______________________
Your Signature:_____________________________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.