SUBORDINATED PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY
NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN OPINION OF COUNSEL TO THE MAKER THAT SUCH
REGISTRATION IS NOT REQUIRED. THIS NOTE IS SUBJECT TO A RIGHT OF OFFSET AS
PROVIDED FOR HEREIN. THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT AS FROM TIME TO TIME AMENDED, RESTATED, SUPPLEMENTED OR
OTHERWISE MODIFIED, DATED AS OF OCTOBER 24, 1998, AMONG NATIONSBANK,
NATIONAL ASSOCIATION, AS AGENT FOR VARIOUS LENDERS,
CULTURALACCESSWORLDWIDE, INC., AND THE HOLDER OF THIS NOTE. THIS NOTE MAY
NOT BE AMENDED OR MODIFIED WITHOUT THE CONSENT OF SUCH LENDERS.
6.5% Subordinated Promissory Note
due October 24, 2001
----------------------------------
$5,500,000 Arlington,
October 24, 1998 Virginia
Section 1. General. FOR VALUE RECEIVED, CULTURALACCESSWORLDWIDE
INC., a Delaware corporation (the "Maker"), hereby promises to pay to the order
of Ann M. Holmes (the "Payee"), at the offices of the Maker (except that the
Payee may require that payments shall be made to the Payee by mail at such
address as the Payee shall from time to time designate in writing to the Maker),
the principal sum of Five Million Five Hundred Thousand Dollars ($5,500,000), in
lawful money of the United States of America or such lesser amount as may be
payable due to offsets, if any, as provided for herein.
The principal amount hereof shall be payable in one (1) installment
in the amount of One Million Eight Hundred Thirty Three Thousand Dollars and
Thirty Four Cents ($1,833,333.34), payable on October 24, 1999 and two (2)
installments of One Million Eight Hundred Thirty Three Thousand Dollars and
Thirty Three Cents ($1,833,333.33) each, payable on October 24, 2000 and October
24, 2001, or such lesser amounts as may be payable due to offsets, if any. The
entire principal amount of this Note then outstanding together with any
outstanding accrued and unpaid interest thereon shall be due and payable on
October 24, 2001.
2
The Maker hereby also promises to pay interest on the unpaid
principal amount hereof in like money, payable semi-annually commencing on April
24, 1999 and ending with the final payment of the principal due hereunder, at
such place, from the date hereof until payment of the principal amount hereof
has been made in full, at a fixed rate of six and one-half percent (6.5%) per
annum. Interest shall be computed on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. To the extent permitted by applicable
law, upon the occurrence and during the continuation of an event of default, as
set forth in Section 4 hereunder, any outstanding principal of this Note shall
bear interest at a rate of twelve percent (12%) per annum.
Section 2. Subordination. The Maker hereby covenants and agrees, and
the holder of this Note, by such holder's acceptance hereof, hereby consents,
covenants and agrees, that, the indebtedness of the Maker for or on account of
principal and interest on this Note, and the payment of the principal of and
interest (whether by redemption or otherwise) on this Note, is hereby expressly
made subordinate and junior in right of payment to the extent provided in the
Note Subordination Agreement signed as of the date hereof by and among the
Maker, the Payee and NationsBank, National Association (the "Note Subordination
Agreement").
Section 3. Optional Prepayment. The Maker may at any time with the
prior written consent of the holders of Superior Indebtedness so long as any
Superior Indebtedness (as defined in the Note Subordination Agreement) is
outstanding, prepay the whole or any part of the unpaid principal amount of this
Note, without penalty or premium, but with interest accrued to the date fixed
for prepayment. Notices of prepayment shall be given by the Maker by mail and
shall be mailed to the holder of this Note not less than thirty (30) days from
the date fixed for prepayment. In case this Note is to be prepaid in part only,
such notice shall specify the principal amount hereof to be prepaid, and shall
state that this Note shall be submitted to the Maker for notation hereon of the
principal amount hereof to be prepaid. Upon giving of notice of prepayment as
aforesaid, this Note or portion hereof so specified for prepayment shall on the
prepayment date specified in such notice become due and payable, and from and
after the prepayment date so specified (unless the Maker shall default in making
such prepayment), interest on this Note or portion hereof so specified for
prepayment shall cease to accrue and, on presentation and surrender hereof to
the Maker for cancellation in the case of this Note being prepaid as a whole, or
for notation hereon of the payment of the portion of the principal amount hereof
being prepaid in the case of a prepayment of this Note in part only, this Note
or portion hereof so specified for prepayment shall be paid by the Maker at the
prepayment price aforesaid.
Section 4. Events of Default and Remedies. Subject to the Note
Subordination Agreement, the holder of this Note shall have the right, without
demand or notice, to accelerate this Note and to declare the entire unpaid
balance hereof and the obligations evidenced hereby immediately due and payable
and to seek and obtain payment of this Note upon the occurrence of any of the
following events of default: (a) the Maker fails to pay any installment of
principal payable under this Note or interest thereon within twenty-one (21)
days after receipt of written notice from the holder of this Note to the effect
that such installment or interest has not been paid when due, or (b) the
3
Maker admits in writing its inability to pay its debts generally as they become
due, files a petition in bankruptcy or a petition to take advantage of any
bankruptcy, reorganization or insolvency act, makes an assignment for the
benefit of creditors, or consents to the appointment of a receiver for itself or
for all or substantially all of its property or, on a petition in bankruptcy
filed against it, is adjudicated a bankrupt, which judgment, order or decree
shall not be appealed within the permitted time period from the date of entry
thereof and subsequently vacated, or (c) the occurrence of a payment default
under the Maker's Credit Agreement dated April 9, 1998 with NationsBank,
National Association (the "Bank"), resulting in the Bank accelerating its
promissory note and declaring the entire unpaid balance thereof and the
obligations evidenced thereby immediately due and payable.. Upon such
declaration by the holder of this Note, the obligations evidenced by this Note
shall be immediately due and payable.
In the event of any event of default hereunder, the Maker agrees to
pay to the holder of this Note all expenses incurred by such holder, including,
without limitation, reasonable fees and disbursements of counsel, incurred by
such holder in the enforcement and collection of this Note.
Section 5. Right of Offset. The principal amount of and interest
accrued on this Note may be offset at any time or from time to time to the
extent of the full amount of any Purchaser's Damages (as defined in the
Agreement of Purchase and Sale dated as of October 24, 1998, by and among the
Maker, the Payee and A M Medica Communications, Ltd., a New York corporation
(the "Purchase Agreement")), except for any Purchaser's Damages arising from a
breach of Section X of the Purchase Agreement. The Maker shall have the right to
offset the full amount of any such Purchaser's Damages by reducing the amount of
the principal of and accrued but unpaid interest on this Note by the amount of
such Purchaser's Damages. After the date of any offset, interest shall accrue on
the amount of principal which remains after such offset. The exercise of the
right of offset provided for in this Section 5 is not an exclusive remedy, and
the provisions of this Section 5 shall not prevent the Maker from exercising all
remedies otherwise permitted under applicable law, the terms of the Purchase
Agreement or the terms of this Note.
Section 6. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York and shall be
binding upon the successors and assigns of the Maker and inure to the benefit of
the Payee, the Payee's successors, endorsees and assigns.
Section 7. Severability. If any term or provision of this Note
shall be held invalid, illegal or unenforceable, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
CULTURALACCESSWORLDWIDE, INC.
By /s/John Fitzgerald
-------------------------
Name: John Fitzgerald
Title: President