Promissory Note and Security Agreement dated August 6, 1999



 
EXHIBIT 10.26

 
PROMISSORY NOTE 
 

	 $225,000
	 	 August 6, 1999


 
For
value received, the undersigned promises to pay to Symphonix Devices, Inc., a Delaware corporation (the “Company”), or order, at its principal office the principal sum of $225,000 with interest thereon at the rate of 5.96% percent
compounded annually on the unpaid balance of the principal sum. Said principal and interest shall be due on the earlier of (i) August 6, 2004, (ii) thirty (30) days following the sale by the undersigned of shares of the Common Stock of the Company
which is equal in value to the principal amount of this Note or (iii) twelve months following the date of the undersigned’s employment with the Company. 
 
Principal payable in lawful money of the United States of America. 
 
Should suit be commenced to collect this Note or any portion thereof, such sum as the Court may deem
reasonable shall be added hereto as attorneys’ fees. The maker waives presentment for payment, protest, notice of protest, and notice of non-payment of this Note. 
 
This Note is secured by a pledge of certain shares (the “Shares”) of Common Stock of the Company,
pursuant to the provisions of a Restricted Stock Purchase Agreement and a Security Agreement between the Company and the undersigned each executed contemporaneously with this Note. 
 
The holder of this Note shall have full recourse against the maker, and shall not be required to proceed
against the Shares or other collateral securing this Note in the event of default. 
 

	
	 /s/    KIRK DAVIS    




 







 
SECURITY
AGREEMENT 
 
This Security Agreement is made as
of 6 August, 1999 between Symphonix Devices, Inc., a Delaware corporation (“Pledgee”), and Kirk Davis (“Pledgor”). 
 
Recitals 
 
Pursuant to Pledgor’s election to purchase Shares under the Option Agreement dated 5 August, 1999 (the “Option”), between
Pledgor and Pledgee under Pledgee’s 1994 Stock Option Plan, and Pledgor’s election under the terms of the Option to pay for such shares with his or her promissory note (the “Note”), Pledgor has purchased 100,000 shares of
Pledgee’s Common Stock (the “Shares”) at a price of $2.25 per share, for a total purchase price of $225,000. The Note and the obligations thereunder are as set forth in Exhibit C to the Option. 
 
NOW, THEREFORE, it is agreed as follows: 
 
1.    Creation and Description of
Security Interest.    In consideration of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to
as the “Collateral”) represented by certificate number             , duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary
of Pledgee (“Pledgeholder”), who shall hold said certificate subject to the terms and conditions of this Security Agreement. 
 
The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement. 
 
2.    Pledgor’s Representations and Covenants.    To induce Pledgee to enter into this
Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: 
 
(a)    Payment of Indebtedness.    Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. 
 
(b)    Encumbrances.    The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee. 







 
(c)    Margin Regulations.    In the event that Pledgee’s Common Stock is now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a
“lender” within the meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations (“Regulation G”), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations. 
 
3.    Voting Rights.    During the term of this pledge and so long as all payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder. 
 
4.    Stock Adjustments.    In the event that during the term of the pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the
same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such
Collateral and, upon such substitution, references to “Shares” in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. 
 
5.    Options and Rights.    In the event that, during the
term of this pledge, subscription options or other rights or options shall be issued in connection with the pledged Shares, such rights and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged. 
 
6.    Default.    Pledgor shall be deemed to be in default of the Note and of this Security Agreement in the event: 
 
(a)    Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or 
 
(b)    Pledgor fails to perform any of the covenants set forth in the Option or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee. 
 
In the case of an event of Default, as set forth above,
Pledgee shall have the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code. 
 
7.    Release of Collateral.    Subject to any applicable
contrary rules under Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be
that number of full Shares which bears the same proportion to the initial number of 
 

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Shares pledged hereunder as
the payment of principal bears to the initial full principal amount of the Note. 
 
8.     Withdrawal or Substitution of Collateral.    Pledgor shall not sell, withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee. 
 
9.    Term.    The within pledge of Shares shall continue until the payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to
Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above. 
 
10.    Insolvency.    Pledgor agrees that if a bankruptcy or insolvency proceeding is
instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may
proceed as provided in the case of default. 
 
11.    Pledgeholder Liability.    In the absence of willful or gross negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder.

 
12.    Invalidity of
Particular Provisions.    Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid. 
 
13.    Successors or Assigns.    Pledgor and Pledgee agree that all of the terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term
“Pledgor” and the term “Pledgee” as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 
 
14.    Governing
Law.    This Security Agreement shall be interpreted and governed under the internal substantive laws, but not the choice of law rules, of California. 
 

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IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. 
 

	
	 “PLEDGOR”
	 	 	 	 /s/    KIRK DAVIS


	 	 	 	 	 Signature

	
	 	 	 	 	 Kirk Davis


	 	 	 	 	 Print Name

	
	 	 	 	 	 Address:
  
 191 Bainter Avenue
 Los Gatos, CA
95030
  
  

	
	 “PLEDGEE”
	 	 	 	 Symphonix Devices, Inc.
 Delaware corporation

	
	 	 	 	 	 /s/    ALFRED G. MERRIWEATHER 


	 	 	 	 	 Signature

	
	 	 	 	 	 A.G. Merriweather


	 	 	 	 	 Print Name

	
	 	 	 	 	 CFO


	 	 	 	 	 Title
  
  

	
	 “PLEDGEHOLDER”
	 	 	 	  


	 	 	 	 	 Secretary of Symphonix Devices, Inc.


 

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