1
PROMISSORY NOTE AND PLEDGE AGREEMENT
$575,000 June 9, 1997
For value received, Xxxxx Xxxxx (the "MAKER") promises to pay to Cyrk,
Inc. (the "COMPANY"), the sum of Five Hundred Seventy Five Thousand and 00/100
Dollars ($575,000), together with interest at the rate of 7% per annum from the
date hereof until the principal hereof shall be paid in full.
The unpaid principal balance and accrued but unpaid interest hereof
shall be due and payable upon the first anniversary of the date hereof (the "DUE
DATE"). Failure to repay all principal and interest owed hereunder on the Due
Date shall constitute an event of default ("EVENT OF DEFAULT").
For the purposes of securing payment of this Note, the Maker pledges
and delivers over to the Company the following described property (hereinafter,
the "PLEDGED SHARES") and grants to the Company a security interest in the
Pledged Shares:
(i) 52,904 shares of the Common Stock of the Company,
represented by stock certificate number ___; and
(ii) all shares of stock of the Company resulting from
stock splits, options, non-cash dividends received or
distributed in respect of or in exchange for the
securities referred to in subparagraph (i) above.
The Pledged Shares shall be accompanied by stock powers duly executed
in blank or other instruments of transfer satisfactory to the Company.
The Company shall be without recourse to the Maker for the payment of
all principal and interest due on this Note and shall look solely to the Pledged
Shares for the payment of such amounts.
The Maker hereby represents, warrants and covenants to the Company
that:
(a) The Maker has good title to the Pledged Shares, free and clear of
all claims, mortgages, pledges, liens, security interests and other encumbrances
of every nature whatsoever other than those under applicable securities law or
set forth herein or in a certain Shareholders Agreement dated as of even date by
and between the Company, the Maker, Xxxx Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx
Xxxxx (as amended from time to time, the "SHAREHOLDERS AGREEMENT").
-1-
2
(b) The Maker will not sell, convey or otherwise dispose of any of the
Pledged Shares, nor will the Maker grant, create, incur or permit to exist any
pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever
or any option, right of first refusal or other preemptive right with respect to
any of the Pledged Shares or the proceeds thereof, other than liens on and
security interests in the Pledged Shares created hereby and restrictions
contained in the Shareholders Agreement or under applicable securities laws.
Upon the occurrence of an Event of Default, the Company shall have all
of the rights and remedies provided by law, including, without limitation, those
provided by the Uniform Commercial Code of the Commonwealth of Massachusetts
(the "CODE") (whether or not the Code is in effect in the jurisdiction where
such rights are exercised).
In case there shall exist an Event of Default, subject to the
provisions of the Code or other applicable law, the Company may, by giving 30
day advance written notice to the Maker, cause all or any of the Pledged Shares
to be transferred into its name or into the name of its nominee or nominees. So
long as no Event of Default shall exist, the Maker shall be entitled to exercise
as the Maker shall deem fit, but in a manner not inconsistent with the terms
hereof, the voting power with respect to the Pledged Shares; PROVIDED, HOWEVER,
that upon the occurrence of an Event of Default all rights of the Maker to
exercise such voting power shall cease, and all such rights shall thereupon
become vested in the Company.
Upon the occurrence of an Event of Default and after giving the maker
30 days advance written notice (which notice shall be deemed to meet any
requirements hereunder or under any applicable law, including, without
limitation, the Code, that reasonable notification be given of the time and
place of such sale or other disposition), the Company shall have the right at
any time or times thereafter to sell, resell, assign and deliver all or any of
the Pledged Shares in one or more parcels at any exchange or broker's board or
at public or private sale. Notice may be given without any demand of performance
or other demand, all such demands being hereby expressly waived by the Maker.
All such sales shall be at such commercially reasonable price or prices as the
Company shall deem best and either for cash or on credit or for future delivery
(without assuming any responsibility for credit risk). At any such sale or sales
the Company may purchase any or all of the Pledged Shares to be sold thereat
upon such terms as the Company may deem best. Upon any such sale or sales the
Pledged Shares so purchased shall be held by the purchaser absolutely free from
any claims or rights of whatsoever kind or nature, including any equity of
redemption and any similar rights, all such equity of redemption and any similar
rights
-2-
3
being hereby expressly waived and released by the Maker, other than restrictions
under the Shareholders Agreement or applicable securities law. In the event any
consent, approval or authorization of any governmental agency will be necessary
to effectuate any such sale or sales, the Maker shall execute all such
applications or other instruments as may be required. The proceeds of any such
sale or sales shall be received and applied: first, to the payment of all costs
and expenses of such sale or otherwise in connection with this agreement,
including court costs and attorneys' fees and expenses; second, to the payment
of the amount owed hereunder; and third, any surplus thereafter remaining shall
be paid to the Maker or as a court of competent jurisdiction may otherwise
direct.
The Maker recognizes that the Company may be unable to effect a public
sale of all or a part of the Pledged Shares by reason of certain prohibitions
contained in the Securities Act of 1933, but may be compelled to resort to one
or more private sales to a restricted group of purchasers, each of whom will be
obligated to agree, among other things, to acquire such Pledged Shares for its
own account, for investment and not with a view to the distribution or resale
thereof. The Maker acknowledges that private sales so made may be at prices and
upon other terms less favorable to the seller than if such Pledged Shares were
sold at public sales, and that the Company has no obligation to delay sale of
any such Pledged Shares for the period of time necessary to permit such Pledged
Shares to be registered for public sale under the Securities Act of 1933. The
Maker agrees that any such private sales shall not be deemed to have been made
in a commercially unreasonable manner solely because they shall have been made
under the foregoing circumstances.
This agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without giving effect to any choice of law or
conflicts of law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this agreement this
9th day of June, 1997.
/s/ Xxxxx Xxxxx
--------------------------
Xxxxx Xxxxx
-3-
