Document:

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                                                                   EXHIBIT 10.06

                          CONCORD COMMUNICATIONS, INC.
                                 1997 STOCK PLAN
                (AS AMENDED ON MARCH 12, 1998 AND MARCH 1, 1999)

     1.   PURPOSE; TERMINATION OF PRIOR PLAN. The purpose of the 1997 Stock Plan
(the "Plan") is to encourage key employees of Concord Communications, Inc. (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code. The Company's 1995 Stock Plan (the "1995 Stock Plan") is terminated
effective as of October 16, 1997 and henceforth, the Company shall make no
grants under the 1995 Stock Plan. The 1995 Stock Plan shall, however, continue
to govern all options, awards and other grants granted and outstanding under the
1995 Stock Plan.

     2.   ADMINISTRATION OF THE PLAN.

               A.   BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
          administered by the Board of Directors of the Company (the "Board")
          or, subject to paragraph 2(D) (relating to compliance with Section
          162(m) of the Code), by a committee appointed by the Board of two or
          more of its members (the "Committee"). Hereinafter, all references in
          this Plan to the "Committee" shall mean the Board if no Committee has
          been appointed. Subject to ratification of the grant or authorization
          of each Stock Right by the Board (if so required by applicable state
          law), and subject to the terms of the Plan, the Committee shall have
          the authority to (i) determine to whom (from among the class of
          employees eligible under paragraph 3 to receive ISOs) ISOs shall be
          granted, and to whom (from among the class of individuals and entities
          eligible under paragraph 3 to receive Non-Qualified Options and Awards
          and to make Purchases) Non-Qualified Options, Awards and
          authorizations to make Purchases may be granted; (ii) determine the
          time or times at which Options or Awards shall be granted or Purchases
          made; (iii) determine the purchase price of shares subject to each
          Option or Purchase, which prices shall not be less than the minimum
          price specified in paragraph 6; (iv) determine whether each Option
          granted shall be an ISO or a Non-Qualified Option; (v) determine
          (subject to paragraph 7) the time or times when each Option shall
          become exercisable and the duration of the exercise period; (vi)
          determine whether restrictions such as repurchase options are to be
          imposed on shares subject to Options, Awards and Purchases and the
          nature of such restrictions, if any; and (vii) interpret the Plan and
          prescribe and rescind rules and regulations relating to it. If the
          Committee determines to issue a Non-Qualified Option, it shall take
          whatever actions it deems necessary, under Section 422 of the Code and
          the regulations promulgated thereunder, to ensure that such Option is
          not treated as an ISO. The interpretation and construction by the
          Committee of any provisions of the Plan or of any Stock Right granted
          under it shall be final unless otherwise determined by the Board. The
          Committee may from time to time adopt such rules and regulations for
          carrying out the Plan as it may deem best. No member of the Board or
          of the Committee shall be liable for any action or determination made
          in good faith with respect to the Plan or any Stock Right granted
          under it.

               B.   COMMITTEE ACTIONS. The Committee may select one of its
          members as its chairman, and shall hold meetings at such time and
          places as it may determine. A majority of the Committee shall
          constitute a quorum and acts of a majority of the members of the
          Committee at a meeting at which a quorum is present, or acts reduced
          to or approved in writing by all the members of the Committee (if
          consistent with applicable state law), shall be the valid acts of the
          Committee. From time to time the Board may increase the size of the
          Committee and appoint additional members thereof, remove members (with
          or without cause) and appoint new members

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          in substitution therefor, fill vacancies however caused, or remove all
          members of the Committee and thereafter directly administer the Plan.

               C.   GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Notwithstanding the
          provisions of paragraph 2.A., no Stock Rights shall be granted to any
          person who is, at the time of the proposed grant, a member of the
          Board unless such grant is approved by a majority vote of the
          disinterested members of the Board. All grants of Stock Rights to
          members of the Board shall in all respects be made in accordance with
          the provisions of this Plan applicable to other eligible persons.
          Members of the Board who either (i) are eligible to receive grants of
          Stock Rights pursuant to the Plan or (ii) have been granted Stock
          Rights may vote on any matters affecting the administration of the
          Plan or the grant of any Stock Rights pursuant to the Plan, except
          that no such member shall act upon the granting to himself or herself
          of Stock Rights, but any such member may be counted in determining the
          existence of a quorum at any meeting of the Board during which action
          is taken with respect to the granting to such member of Stock Rights.
          Notwithstanding any other provision of this paragraph 2, in the event
          the Company registers any class of any equity security pursuant to
          Section 12 of the Securities Exchange Act of 1934, as amended (the
          "Exchange Act"), any grants to members of the Board of Options made at
          any time from the effective date of such registration until six months
          after the termination of such registration shall be made only by the
          Board; provided, however, that if a majority of the Board is eligible
          to participate in the Plan or in any other stock option or other stock
          plan of the Company or any of its affiliates, or has been so eligible
          at any time within the preceding year, any grant to directors of
          Options must be made by, or only in accordance with the recommendation
          of, a Committee consisting of three or more persons, who may but need
          not be members of the Board or employees of the Company, appointed by
          the Board but having full authority to act in the matter, none of whom
          is eligible to participate in this Plan or any other stock option or
          other stock plan of the Company or any of its affiliates, or has been
          eligible at any time within the preceding year. The requirements
          imposed by the preceding sentence shall also apply with respect to
          grants to officers who are not also members of the Board. Once
          appointed, the Committee shall continue to serve until otherwise
          directed by the Board.

               D.   PERFORMANCE-BASED COMPENSATION. The Board, in its
          discretion, may take such action as may be necessary to ensure that
          Stock Rights granted under the Plan qualify as "qualified
          performance-based compensation" within the meaning of Section 162(m)
          of the Code and applicable regulations promulgated thereunder
          ("Performance-Based Compensation"). Such action may include, in the
          Board's discretion, some or all of the following (i) if the Board
          determines that Stock Rights granted under the Plan generally shall
          constitute Performance-Based Compensation, the Plan shall be
          administered, to the extent required for such Stock Rights to
          constitute Performance-Based Compensation, by a Committee consisting
          solely of two or more "outside directors" (as defined in applicable
          regulations promulgated under Section 162(m) of the Code), (ii) if any
          Non-Qualified Options with an exercise price less than the fair market
          value per share of Common Stock are granted under the Plan and the
          Board determines that such Options should constitute Performance-Based
          Compensation, such options shall be made exercisable only upon the
          attainment of a pre-established, objective performance goal
          established by the Committee, and such grant shall be submitted for,
          and shall be contingent upon shareholder approval and (iii) Stock
          Rights granted under the Plan may be subject to such other terms and
          conditions as are necessary for compensation recognized in connection
          with the exercise or disposition of such Stock Right or the
          disposition of Common Stock acquired pursuant to such Stock Right, to
          constitute Performance-Based Compensation.

     3.   ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.

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     4.   STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 2,500,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.

     No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 70% of the aggregate number of
shares of Common Stock which may be issued pursuant to the Plan during any
fiscal year of the Company. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part or shall be repurchased by
the Company, the shares subject to such Option shall be included in the
determination of the aggregate number of shares of Common Stock deemed to have
been granted to such employee under the Plan.

     5.   GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after October 16, 1997 and prior to October 15, 2007. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.

     6.   MINIMUM OPTION PRICE; ISO LIMITATIONS.

               A.   PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES.
          Subject to paragraph 2(D) (relating to compliance with Section 162(m)
          of the Code), the exercise price per share specified in the agreement
          relating to each Non-Qualified Option granted, and the purchase price
          per share of stock granted in any Award or authorized as a Purchase,
          under the Plan may be less than the fair market value of the Common
          Stock of the Company on the date of grant; provided that, in no event
          shall such exercise price or such purchase price be less than the
          lesser of (i) the book value per share of Common Stock as of the end
          of the fiscal year of the Company immediately preceding the date of
          such grant, or (ii) 50 percent of the fair market value per share of
          Common Stock on the date of such grant.

               B.   PRICE FOR ISOS. The exercise price per share specified in
          the agreement relating to each ISO granted under the Plan shall not be
          less than the fair market value per share of Common Stock on the date
          of such grant. In the case of an ISO to be granted to an employee
          owning stock possessing more than ten percent (10%) of the total
          combined voting power of all classes of stock of the Company or any
          Related Corporation, the price per share specified in the agreement
          relating to such ISO shall not be less than one hundred ten percent
          (110%) of the fair market value per share of Common Stock on the date
          of grant. For purposes of determining stock ownership under this
          paragraph, the rules of Section 424(d) of the Code shall apply.

               C.   $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible
          employee may be granted Options treated as ISOs only to the extent
          that, in the aggregate under this Plan and all incentive stock option
          plans of the Company and any Related Corporation, ISOs do not become
          exercisable for the first time by such employee during any calendar
          year with respect to stock having a fair market value (determined at
          the time the ISOs were granted) in excess of $100,000. The Company
          intends to designate any Options granted in excess of such limitation
          as Non-Qualified Options, and the Company shall issue separate
          certificates to the optionee with respect to Options that are
          Non-Qualified Options and Options that are ISOs.

               D.   DETERMINATION OF FAIR MARKET VALUE. If, at the time an
          Option is granted under the Plan, the Company's Common Stock is
          publicly traded, "fair market value" shall be determined as of the
          date of grant or, if the prices or quotes discussed in this sentence
          are unavailable for such date, the last business day for which such
          prices or quotes are available prior to the date of grant and shall
          mean (i) the average (on that date) of the high and low prices of the
          Common Stock on the principal national securities exchange on which
          the Common Stock is

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          traded, if the Common Stock is then traded on a national securities
          exchange; or (ii) the last reported sale price (on that date) of the
          Common Stock on the Nasdaq National Market, if the Common Stock is not
          then traded on a national securities exchange; or (iii) the closing
          bid price (or average of bid prices) last quoted (on that date) by an
          established quotation service for over-the-counter securities, if the
          Common Stock is not reported on the Nasdaq National Market. If the
          Common Stock is not publicly traded at the time an Option is granted
          under the Plan, "fair market value" shall mean the fair value of the
          Common Stock as determined by the Committee after taking into
          consideration all factors which it deems appropriate, including,
          without limitation, recent sale and offer prices of the Common Stock
          in private transactions negotiated at arm's length.

     7.   OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.

     8.   EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:

               A.   VESTING. The Option shall either be fully exercisable on the
          date of grant or shall become exercisable thereafter in such
          installments as the Committee may specify.

               B.   FULL VESTING OF INSTALLMENTS. Once an installment becomes
          exercisable, it shall remain exercisable until expiration or
          termination of the Option, unless otherwise specified by the
          Committee.

               C.   PARTIAL EXERCISE. Each Option or installment may be
          exercised at any time or from time to time, in whole or in part, for
          up to the total number of shares with respect to which it is then
          exercisable.

               D.   ACCELERATION OF VESTING. The Committee shall have the right
          to accelerate the date that any installment of any Option becomes
          exercisable; provided that the Committee shall not, without the
          consent of an optionee, accelerate the permitted exercise date of any
          installment of any Option granted to any employee as an ISO (and not
          previously converted into a Non-Qualified Option pursuant to paragraph
          16) if such acceleration would violate the annual vesting limitation
          contained in Section 422(d) of the Code, as described in paragraph
          6(C).

     9.   TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate after the passage of 60 days
from the date of termination of his or her employment, but in no event later
than on the specified expiration dates of such ISOs, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of this paragraph
9, a leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the employee after the approved period of absence.
Employment shall also be considered as continuing uninterrupted during any other
bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such optionee's right
to reemployment is guaranteed by statute or by contract. A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the

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optionee after the approved period of absence. ISOs granted under the Plan shall
not be affected by any change of employment within or among the Company and
Related Corporations, so long as the optionee continues to be an employee of the
Company or any Related Corporation. Nothing in the Plan shall be deemed to give
any grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.

     10.  DEATH; DISABILITY.

               A.   DEATH. If an ISO optionee ceases to be employed by the
          Company and all Related Corporations by reason of his or her death,
          any ISO owned by such optionee may be exercised, to the extent
          otherwise exercisable on the date of death, by the estate, personal
          representative or beneficiary who has acquired the ISO by will or by
          the laws of descent and distribution, at any time prior to the earlier
          of (i) the specified expiration date of the ISO or (ii) 180 days from
          the date of the optionee's death.

               B.   DISABILITY. If an ISO optionee ceases to be employed by the
          Company and all Related Corporations by reason of his or her
          disability, such optionee shall have the right to exercise any ISO
          held by him or her on the date of termination of employment, for the
          number of shares for which he or she could have exercised it on that
          date, at any time prior to the earlier of (i) the specified expiration
          date of the ISO or (ii) 180 days from the date of the termination of
          the optionee's employment. For the purposes of the Plan, the term
          "disability" shall mean "permanent and total disability" as defined in
          Section 22(e)(3) of the Code or any successor statute.

     11.  ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.

     12.  TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.

     13.  ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:

               A.   STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
          Stock shall be subdivided or combined into a greater or smaller number
          of shares or if the Company shall issue any shares of Common Stock as
          a stock dividend on its outstanding Common Stock, the number of shares
          of Common Stock deliverable upon the exercise of Options shall be
          appropriately increased or decreased proportionately, and appropriate
          adjustments shall be made in the purchase price per share to reflect
          such subdivision, combination or stock dividend.

               B.   CONSOLIDATIONS OR MERGERS. If the Company is to be
          consolidated with or acquired by another entity in a merger or other
          reorganization in which the holders of the outstanding voting stock of
          the Company immediately preceding the consummation of such event,
          shall, immediately following such event, hold, as a group, less than a
          majority of the voting securities of the surviving or successor
          entity, or in the event of a sale of all or substantially all of the
          Company's assets or otherwise (each, an "Acquisition"), the Committee
          may take one or more

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          of the following actions: (i) provide for the acceleration and/or
          termination of any time period relating to the exercise of the
          Options, (ii) provide for the purchase of the Options, upon the
          optionee's request, for the amount in cash that could have been
          received upon the exercise of the Options and sale of the shares
          obtained thereby, (iii) adjust the terms of the Options in a manner
          determined by the Committee, (iv) cause the Options to be assumed, or
          new rights substituted therefor, by another entity or (v) make such
          other provision as the Committee may consider equitable and in the
          best interests of the Company.

               C.   RECAPITALIZATION OR REORGANIZATION. In the event of a
          recapitalization or reorganization of the Company (other than a
          transaction described in subparagraph B above) pursuant to which
          securities of the Company or of another corporation are issued with
          respect to the outstanding shares of Common Stock, an optionee upon
          exercising an Option shall be entitled to receive for the purchase
          price paid upon such exercise the securities he or she would have
          received if he or she had exercised such Option prior to such
          recapitalization or reorganization.

               D.   MODIFICATION OF ISOS. Notwithstanding the foregoing, any
          adjustments made pursuant to subparagraphs A, B or C with respect to
          ISOs shall be made only after the Committee, after consulting with
          counsel for the Company, determines whether such adjustments would
          constitute a "modification" of such ISOs (as that term is defined in
          Section 424 of the Code) or would cause any adverse tax consequences
          for the holders of such ISOs. If the Committee determines that such
          adjustments made with respect to ISOs would constitute a modification
          of such ISOs or would cause adverse tax consequences to the holders,
          it may refrain from making such adjustments.

               E.   RESTRICTED SECURITIES. If any person or entity owning
          restricted Common Stock obtained by exercise of an Option made
          hereunder receives new or additional or different shares or securities
          ("New Securities") in connection with a transaction described in
          subparagraphs A, B or C above, as a result of owning such restricted
          Common Stock, such New Securities shall be subject to all of the
          conditions and restrictions applicable to the restricted Common Stock
          with respect to which such New Securities were issued.

               F.   ISSUANCES OF SECURITIES. Except as expressly provided
          herein, no issuance by the Company of shares of stock of any class, or
          securities convertible into shares of stock of any class, shall
          affect, and no adjustment by reason thereof shall be made with respect
          to, the number or price of shares subject to Options. No adjustments
          shall be made for dividends paid in cash or in property other than
          securities of the Company.

               G.   FRACTIONAL SHARES. No fractional shares shall be issued
          under the Plan. Any fractional shares which, but for this subparagraph
          G, would have been issued to an optionee pursuant to an Option, shall
          be deemed to have been issued and immediately sold to the Company for
          their fair market value, and the optionee shall receive from the
          Company cash in lieu of such fractional shares.

               H.   ADJUSTMENTS. Upon the happening of any of the events
          described in subparagraphs A, B or C above, the class and aggregate
          number of shares set forth in paragraph 4 hereof that are subject to
          Stock Rights which previously have been or subsequently may be granted
          under the Plan shall also be appropriately adjusted to reflect the
          events described in such subparagraphs. The Committee shall determine
          the specific adjustments to be made under this paragraph 13 and,
          subject to paragraph 2, its determination shall be conclusive.

     14.  MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at

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the discretion of the Committee, by delivery of the optionee's personal recourse
note bearing interest payable not less than annually at no less than 100% of the
lowest applicable Federal rate, as defined in Section 1274(d) of the Code, (d)
at the discretion of the Committee and consistent with applicable law, through
the delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the Option
and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.

     15.  TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board in July
1997 and by the stockholders of the Company on September 9, 1997. The Plan was
amended on March 12, 1998 to increase the number of shares authorized for
issuance under the Plan by 750,000 shares to 1,500,000, and such amendment was
approved by the stockholders of the Company at the Annual Meeting held on April
30, 1998. On March 1, 1999, the Board of Directors further amended the Plan to
increase the number of shares authorized for issuance under the Plan by
1,000,000 shares to 2,500,000 shares and to make certain other minor
modifications, subject to approval of the amendment of the Plan by the
stockholders of the Company at the next Meeting of Stockholders. If the approval
of the amendment by the stockholders is not obtained prior to March 1, 2000, any
grants of ISOs under the Plan which include shares from the additional number of
shares authorized by the amendment made prior to that date but subsequent to the
date of the amendment will be rescinded. The Plan shall expire at the end of the
day on October 15, 2007 (except as to Options outstanding on that date). Subject
to the provisions of paragraph 5 above, Options may be granted under the Plan
prior to the date of stockholder approval of the Plan. The Board may terminate
or amend the Plan in any respect at any time, except that, without the approval
of the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without such grantee's
consent, under any Stock Right previously granted to such grantee.

     16.  MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS.
Subject to paragraph 13(D), without the prior written consent of the holder of
an ISO, the Committee shall not alter the terms of such ISO (including the means
of exercising such ISO) if such alteration would constitute a modification
(within the meaning of Section 424(h)(3) of the Code). The Committee, at the
written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period of such ISOs. At the time of such conversion, the Committee (with the
consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs. The Committee, with the consent of the optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
conversion.

     17.  APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.

<PAGE>   8

     18.  NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.

     19.  WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold, or may require the grantee to pay,
additional withholding taxes in respect of amounts that constitute compensation
includible in gross income. The Committee in its discretion may condition (i)
the exercise of an Option, (ii) the transfer of a Non-Qualified Stock Option,
(iii) the grant of an Award, (iv) the making of a Purchase of Common Stock for
less than its fair market value, or (v) the vesting or transferability of
restricted stock or securities acquired by exercising an Option, on the
grantee's making satisfactory arrangement for such withholding. Such arrangement
may include payment by the grantee in cash or by check of the amount of the
withholding taxes or, at the discretion of the Committee, by the grantee's
delivery of previously held shares of Common Stock or the withholding from the
shares of Common Stock otherwise deliverable upon exercise of a Option shares
having an aggregate fair market value equal to the amount of such withholding
taxes.

     20.  GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For example, the Company
may be required to send tax information statements to employees and former
employees that exercise ISOs under the Plan, and the Company may be required to
file tax information returns reporting the income received by grantees of
Options in connection with the Plan.

     21.  GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.<PAGE>   1
                                                                   Exhibit 10.16

                          REGISTRATION RIGHTS AGREEMENT

                  THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of November 10, 1999, by and among OVERSEAS TOYS, L.P., a Delaware limited
partnership (the "Investor") and CYRK, INC., a Delaware corporation (the
"Company").

                  WHEREAS, the Investor and the Company are parties to that
certain Securities Purchase Agreement dated September 1, 1999 (the "Securities
Purchase Agreement"), whereby, among other things, the Company will issue to the
Investor an aggregate of 25,000 shares of Series A Senior Cumulative
Participating Convertible Preferred Stock of the Company (the "Series A
Preferred Stock"), and a warrant to purchase an additional 15,000 shares of
Series A Preferred Stock (the "Warrant"), pursuant to the terms and conditions
set forth in the Securities Purchase Agreement;

                  WHEREAS, pursuant to the covenants of the Company contained in
the Securities Purchase Agreement, and as a condition to the Investor's
obligation to consummate the closing of the transactions contemplated thereby,
the Company is entering into this registration rights agreement (this
"Agreement") with the Investor with respect to the Warrant and the shares of
Company common stock, $.01 par value per share ("Common Stock"), underlying all
of the shares of Series A Preferred Stock and the Warrant that are being
acquired by the Investor pursuant to the Securities Purchase Agreement;

                  NOW, THEREFORE, upon the premises and the mutual promises
contained herein and in the Securities Purchase Agreement, and for good and
valuable consideration, the receipt and adequacy of which are acknowledged, the
parties hereto agree as follows:

                  1.  CERTAIN DEFINITIONS. As used in this Agreement, the
following initially capitalized terms shall have the following meanings:

                      (a) "Affiliate" means, with respect to any person, any
other person who, directly or indirectly, is in control of, is controlled by or
is under common control with the former person.

                      (b) "Best Efforts" means the commercially reasonable
efforts that a prudent Person desirous of achieving a result would use in good
faith in similar circumstances to ensure that such result is achieved as
expeditiously as can reasonably be expected.

                      (c) "Holders" means the Investor or any Affiliate of the
Investor or any trustee for the account of the Investor and any "transferee" (as
such term is defined in Section 10(a) hereof) which is the record holder of
Registrable Securities.

<PAGE>   2

                      (d) "Registrable Securities" means the Warrant and the
shares of Common Stock underlying all of the shares of Series A Preferred Stock
and the Warrant that are being acquired by the Investor pursuant to the
Securities Purchase Agreement (collectively, the "Acquired Securities"), any
stock or other securities into which or for which such Acquired Securities may
hereafter be changed, converted or exchanged, and any other securities issued to
the Holders of such Acquired Securities (or such securities into which or for
which such Acquired Securities are so changed, converted or exchanged) upon any
reclassification, share combination, share subdivision, share dividend, merger,
consolidation or similar transactions or events, provided that any such
securities shall cease to be Registrable Securities if (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act (as defined below) and such securities shall
have been disposed of in accordance with the plan of distribution set forth in
such registration statement, (ii) such securities shall have been transferred
pursuant to Rule 144, or (iii) such securities are held by a Holder other than
the Investor, unless such Holder shall furnish the Company an opinion of
counsel, which opinion shall be reasonably satisfactory to the Company, to the
effect that all of such securities are not permitted to be distributed by such
Holder in one transaction pursuant to Rule 144.

                      (e) "Registration Expenses" means all reasonable expenses
in connection with any registration of securities pursuant to this Agreement
including, without limitation, the following: (i) SEC filing fees; (ii) the
fees, disbursements and expenses of the Company's counsel(s) and accountants in
connection with the registration of the Registrable Securities to be disposed of
under the Securities Act; (iii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to any Holders, underwriters and dealers and all
expenses incidental to delivery of the Registrable Securities; (iv) the cost of
producing blue sky or legal investment memoranda; (v) all expenses in connection
with the qualification of the Registrable Securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters or Holders (provided that only the
fees and disbursements of a single counsel or firm for the Holders shall be
included) in connection with such qualification and in connection with any blue
sky and legal investments surveys; (vi) the filing fees incident to securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Registrable Securities to be disposed of; (vii)
transfer agents', depositories' and registrars' fees and the fees of any other
agent appointed in connection with such offering; (viii) all security engraving
and security printing expenses; (ix) all fees and expenses payable in connection
with the listing of the Registrable Securities on each securities exchange or
inter-dealer quotation system on which a class of common equity securities of
the Company is then listed; (x) all reasonable out-of-pocket expenses of the
Company incurred in connection with road show presentations; (xi) courier,
overnight delivery, word processing, duplication, telephone and facsimile
expenses of the Company; and (xii) any one-time payment for directors and
officers insurance directly related to such offering, provided the insurer
provides a separate statement for such payment;

                                       2
<PAGE>   3

provided that any underwriting discounts and commissions with respect to the
registration of any Registrable Securities shall not be included.

                      (f) "Rule 144" means Rule 144 promulgated under the
Securities Act, or any similar rule hereafter adopted.

                      (g) "SEC" means the United States Securities and Exchange
Commission.

                      (h) "Securities Act" means the Securities Act of 1933, as
amended, or any successor statute.

                  2.  DEMAND REGISTRATION.

                      (a) At any time, upon written notice from a Holder
requesting that the Company effect the registration under the Securities Act of
any or all of the Registrable Securities held by such Holder, which notice (a
"Demand Registration Notice") shall specify the intended method or methods of
disposition of such Registrable Securities, the Company shall use its Best
Efforts to effect, in the manner set forth in Section 5, the registration under
the Securities Act of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request,
provided that:

                         (i) if prior to receipt of a Demand Registration
         Notice, the Company had commenced a financing plan and if such
         financing plan is an underwritten offering, and, in the good-faith
         business judgment of the Company's underwriter, a registration at the
         time and on the terms requested would materially and adversely affect
         or interfere with such financing plan of the Company or its
         subsidiaries (a "Transaction Blackout"), the Company shall not be
         required to effect a registration pursuant to this Section 2(a) until
         the earliest of (A) the abandonment of such offering, (B) 90 days after
         the termination of such offering, (C) the termination of any "hold
         back" period obtained by the underwriter(s) of such offering from any
         person in connection therewith or (D) 180 days after receipt by the
         Holder requesting registration of the written notice from the Company
         referred to above in this subsection (i);

                         (ii) if, while a registration request is pending
         pursuant to this Section 2(a), the Company, with the prior approval of
         a majority of the Company's Board of Directors, may delay commencing to
         effect such registration until ninety (90) days after receipt of notice
         of such request if the disinterested members of the Board of Directors
         determine, in good faith, that the filing of a registration statement
         at the time of such request would be materially detrimental to the
         Company, provided that the Company shall not

                                       3
<PAGE>   4

         be permitted to delay a requested registration in reliance on this
         clause (ii) more than once in any 12-month period; and

                         (iii) the Company shall not be obligated to file a
         registration statement relating to a registration request pursuant to
         this Section 2(a): (A) within a period of six months after the
         effective date of any other registration statement of the Company
         demanded pursuant to this Section 2(a); or (B) if such registration
         request is for a number of Registrable Securities that represent in the
         aggregate (on an as converted basis) less than the lesser of: (x) one
         million (1,000,000) shares of Common Stock and (y) the remaining number
         of shares of Common Stock owned by the Investor and its Affiliates.

                      (b) Notwithstanding any other provision of this Agreement
to the contrary, a registration requested by a Holder pursuant to this Section 2
shall not be deemed to have been effected (and, therefore, not requested for
purposes of Section 2(a)): (i) if it is withdrawn based upon material adverse
information relating to the Company; or (ii) if after it has become effective
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason other than a misrepresentation or an omission by such Holder and, as a
result thereof, less than 90% of the Registrable Securities requested to be
registered can be completely distributed in accordance with the plan of
distribution set forth in the related registration statement.

                      (c) In the event that any registration pursuant to this
Section 2 shall involve, in whole or in part, an underwritten offering, the
Holder initiating the demand pursuant to Section 2(a) shall have the right to
designate an underwriter as the sole lead managing underwriters of such
underwritten offering, subject to the Company's consent which shall not be
unreasonably withheld.

                      (d) Holders other than the Holder initiating the demand
pursuant to Section 2(a) shall have the right to include their shares of
Registrable Securities in any registration pursuant to Section 2(a); provided
that the Investor may exclude participation by other Holders in connection with
registrations pursuant to two demands (no two of which can be in consecutive
years). In connection with those registrations in which multiple Holders
participate, in the event such registration involves an underwritten offering
and the Holder initiating demand pursuant to Section 2(a) is advised in writing
(with a copy to the Company) by the lead managing underwriter designated by such
Holder pursuant to Section 2(c) that, in such firm's good-faith opinion,
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting and
registration shall be allocated pro rata among the Holders on the basis of the
shares of Registrable Securities held by each such Holder.

                      (e) The Company shall have the right to cause the
registration of additional securities for sale for the account of any person
(including the Company) in any

                                       4
<PAGE>   5

registration of Registrable Securities requested by a Holder pursuant to Section
2(a); provided that the Company shall not have the right to cause the
registration of such additional securities if such Holder is advised in writing
(with a copy to the Company) by the lead managing underwriter designated by the
Holder pursuant to Section 2(c) that, in such firm's good-faith opinion,
registration of such additional securities would materially and adversely affect
the offering and sale of the Registrable Securities then contemplated by such
Holder.

                      (f) In the event that any Demand Registration Notice
includes a request for registration of the Warrant (or any portion thereof), the
Company may elect, by written notice (the "Election Notice") to the Investor
given within five (5) business days of the Company's receipt of such Demand
Registration Notice, to purchase the Warrant (or such portion thereof) in lieu
of proceeding with the registration of the Warrant pursuant to this Section 2.
On the third (3rd) business day following the Company's delivery to such Holder
of the Election Notice, the Company shall pay to the Holder by wire transfer of
immediately available funds an amount equal to (i) the average of the Closing
Prices (as defined in the Warrant) of the Common Stock for the twenty (20)
consecutive Trading Days (as defined in the Certificate of Designation of the
Series A Preferred Stock) preceding the date of delivery of the Demand
Registration Notice, multiplied by (ii) the total number of shares of Common
Stock that would be issuable upon conversion of the shares of Series A Preferred
Stock represented by the Warrant (or such portion thereof) less the number of
shares of Common Stock with an aggregate Trading Price (as defined in the
Warrant) as of the date of the Demand Registration Notice equal to the Warrant
Price (as defined in the Warrant) for the Warrant (or such portion thereof).

                      3. PIGGYBACK REGISTRATION. At any time if the Company
proposes to register any of its Common Stock or any other of its common equity
securities (collectively, "Other Securities") under the Securities Act (other
than a registration on Form S-4 or S-8 or any successor form thereto), whether
or not for sale for its own account, in a manner which would permit registration
of Registrable Securities for sale for cash to the public under the Securities
Act, it will each such time give prompt written notice to each Holder of its
intention to do so as soon as practicable but in any event at least ten (10)
business days prior to the anticipated filing date of the registration statement
relating to such registration. Such notice shall offer each such Holder the
opportunity to include in such registration statement such number of Registrable
Securities as each such Holder may request. Upon the written request (a
"Piggyback Registration Request") of any such Holder made within five (5)
business days after the receipt of the Company's notice (which request shall
specify the number of Registrable Securities intended to be disposed of and the
intended method of disposition thereof), the Company shall effect, in the manner
set forth in Section 5, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register, to the extent
required to permit the disposition (in accordance with such intended methods
thereof) of the Registrable Securities so requested to be registered, provided
that:

                                       5
<PAGE>   6

                      (a) if, at any time after giving such written notice of
its intention to register any of its securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to each
holder of Registrable Securities and thereupon shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith as provided in Section 4), without prejudice, however, to
the rights of Stockholders to request that such registration be effected as a
registration under Section 2;

                      (b) (i) if the registration referred to in the first
sentence of this Section 3 is to be an underwritten primary registration on
behalf of the Company, and the managing underwriter advises the Company in
writing that, in such firm's opinion, such offering would be materially and
adversely affected by the inclusion therein of the Registrable Securities
requested to be included therein, the Company shall include in such
registration: (1) first, all securities the Company proposes to sell for its own
account (the "Company Securities") and (2) second, up to the full amount of
securities (including Registrable Securities) in excess of the number or dollar
amount of the Company Securities, which, in the good-faith opinion of such
managing underwriter, can be so sold without materially and adversely affecting
such offering (and, if less than the full number of such securities, allocated
pro rata among the Holders and Other Holders (as defined below) of such
securities on the basis of the number of securities (including Registrable
Securities) requested to be included therein by each such Holder and Other
Holder) and (ii) if the registration referred to in the first sentence of this
Section 3 is to be an underwritten secondary registration on behalf of holders
of securities (other than Registrable Securities) of the Company (the "Other
Holders"), and the managing underwriter advises the Company in writing that in
their good-faith opinion such offering would be materially and adversely
affected by the inclusion therein of the Registrable Securities requested to be
included therein, the Company shall include in such registration: (1) first, all
securities that the Other Holder who made the initial demand for such
registration proposes to sell and (2) second, up to the full amount of
securities (including Registrable Securities) in excess of the number or dollar
amount of the securities set forth in the preceding clause (1), which, in the
good-faith opinion of such managing underwriter, can be so sold without
materially and adversely affecting such offering (and, if less than the full
number of such securities, allocated pro rata among the Holders and the
remaining Other Holders of such securities on the basis of the number of
securities (including Registrable Securities) requested to be included therein
by each Holder and each remaining Other Holder);

                      (c) the Company shall not be required to effect any
registration of Registrable Securities under this Section 3 incidental to the
registration of any of its securities in connection with mergers, acquisitions,
dividend reinvestment plans or stock option or other executive or employee
benefit or compensation plans; and

                                       6
<PAGE>   7

                      (d) no registration of Registrable Securities effected
under this Section 3 shall relieve the Company of its obligation to effect a
registration of Registrable Securities pursuant to Section 2 hereof.

                      (e) In the event that any Piggyback Registration Request
includes a request for registration of the Warrant (or any portion thereof), the
Company may elect, by written notice (the "Election Notice") to the Investor
given within five (5) business days of the Company's receipt of such Piggyback
Registration Request, to purchase the Warrant (or such portion thereof) in lieu
of proceeding with the registration of the Warrant pursuant to this Section 3.
On the third (3rd) business day following the Company's delivery to such Holder
of the Election Notice, the Company shall pay to the Holder by wire transfer of
immediately available funds an amount equal to (i) the average of the Closing
Prices (as defined in the Warrant) of the Common Stock for the twenty (20)
consecutive Trading Days (as defined in the Certificate of Designation of the
Series A Preferred Stock) preceding the date of delivery of the Piggyback
Registration Request, multiplied by (ii) the total number of shares of Common
Stock that would be issuable upon conversion of the shares of Series A Preferred
Stock represented by the Warrant (or such portion thereof) less the number of
shares of Common Stock with an aggregate Trading Price (as defined in the
Warrant) as of the date of the Piggyback Registration Request equal to the
Warrant Price (as defined in the Warrant) for the Warrant (or such portion
thereof).

                  4.  EXPENSES. The Company agrees to pay all Registration
Expenses with respect to an offering pursuant to Section 2 and Section 3 hereof.

                  5.  REGISTRATION AND QUALIFICATION.

                      (a) If and whenever the Company is required to use its
Best Efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2 or 3 hereof, the Company shall:

                         (i) prepare and file a registration statement under the
         Securities Act relating to the Registrable Securities to be offered as
         soon as practicable, but in no event later than 30 days (60 days if the
         applicable registration form is other than Form S-3) after the date
         notice is given, and use its Best Efforts to cause the same to become
         effective as promptly as practicable;

                         (ii) prepare and file with the SEC such amendments and
         supplements to such registration statement and the prospectus used in
         connection therewith as may be necessary to (x) keep such registration
         statement effective until the earlier of such time as all of such
         Registrable Securities have been disposed of in accordance with the
         intended methods of disposition by the Holder or Holders thereof set
         forth in such registration statement or the expiration of nine months
         after such registration statement becomes effective and (y) comply with
         the provisions of the Securities Act;

                                       7
<PAGE>   8

                         (iii) furnish to the Holders and to any underwriter of
         such Registrable Securities such number of conformed copies of such
         registration statement and of each such amendment and supplement
         thereto (in each case including all exhibits), such number of copies of
         the prospectus included in such registration statement (including each
         preliminary prospectus and any summary prospectus), in conformity with
         the requirements of the Securities Act, and such other documents, as
         the Holders or such underwriter may reasonably request in order to
         facilitate the public sale of the Registrable Securities, and a copy of
         any and all transmittal letters or other correspondence to, or received
         from, the SEC or any other governmental agency or self-regulatory body
         or other body having jurisdiction (including any domestic or foreign
         securities exchange) relating to such offering;

                         (iv) unless the exemption from state regulation of
         securities offerings under Section 18 of the Securities Act applies,
         use its Best Efforts to register or qualify all Registrable Securities
         covered by such registration statement under the securities or blue sky
         laws of such jurisdictions as the Holders or any underwriter of such
         Registrable Securities shall request, and use its Best Efforts to
         obtain all appropriate registrations, permits and consents required in
         connection therewith, and do any and all other acts and things which
         may be necessary or advisable to enable the Holders or any such
         underwriter to consummate the disposition in such jurisdictions of its
         Registrable Securities covered by such registration statement;

                         (v) furnish to each Holder selling Registrable
         Securities by means of such registration (each a "Selling Holder"), at
         such Selling Holder's request, a signed counterpart, addressed to such
         Selling Holder, of (x) an opinion of counsel for the Company, dated the
         effective date of such registration statement (or, if such registration
         includes an underwritten public offering, dated the date of the closing
         under the underwriting agreement speaking both as of the effective date
         of the registration statement and the date of the closing under the
         underwriting agreement) and (y) a "cold comfort" letter dated the
         effective date of such registration statement (and, if such
         registration statement includes an underwritten public offering, dated
         the date of the closing under the underwriting agreement) signed by the
         independent public accountants who have certified the Company's
         financial statements included in such registration statement, covering
         substantially the same matters with respect to such registration
         statement (and the prospectus included therein) and, in the case of
         such accountants' letter, with respect to events subsequent to the date
         of such financial statements, as are customarily covered in opinions of
         issuer's counsel and in accountants' letters delivered to underwriters
         in underwritten public offerings of securities and, in the case of the
         accountants' letter, such other financial matters, as such Selling
         Holder may reasonably request;

                         (vi) immediately notify the Selling Holders in writing
         (x) at any time when a prospectus relating to a registration pursuant
         to Section 2 or 3 hereof is required to be delivered under the
         Securities Act of the happening of any event as a

                                       8
<PAGE>   9

         result of which the prospectus included in such registration statement,
         as then in effect, includes an untrue statement of a material fact or
         omits to state any material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading, and (y) of any request by
         the SEC or any other regulatory body or other body having jurisdiction
         for any amendment of or supplement to any registration statement or
         other document relating to such offering, and in either such case (x)
         or (y) at the request of the Selling Holders, subject to Section 4
         hereof, prepare and furnish to the Selling Holders a reasonable number
         of copies of a supplement to or an amendment of such prospectus as may
         be necessary so that, as thereafter delivered to the purchasers of such
         Registrable Securities, such prospectus shall not include an untrue
         statement of material fact or omit to state a material fact required to
         be stated therein or necessary to make the statements therein, in light
         of the circumstances under which they are made, not misleading;

                         (vii) otherwise use its Best Efforts to comply with all
         applicable rules and regulations of the SEC, and make available to its
         securities holders, as soon as reasonably practicable, an earnings
         statement covering the period of at least twelve (12) months, but not
         more than eighteen (18) months, beginning with the first month of the
         first fiscal quarter after the effective date of such registration
         statement, which earnings statement shall satisfy the provisions of
         Section 11(a) of the Securities Act;

                         (viii) use its Best Efforts to list such Registrable
         Securities on each securities exchange on which shares of Common Stock
         of the Company are then listed (including NASDAQ), if such securities
         are not already so listed and if such listing is then permitted under
         the rules of such exchange, and, if necessary, provide a transfer agent
         and registrar for such Registrable Securities not later than the
         effective date of such registration statement, with all expenses in
         connection therewith to be paid in accordance with Section 4 hereof;
         and

                         (ix) furnish unlegended certificates representing
         ownership of the Registrable Securities being sold in such
         denominations as shall be requested by the Selling Holders or the
         underwriters with expenses therewith to be paid in accordance with
         Section 4 hereof.

                      (b) The Holder of Registrable Securities on whose behalf
Registrable Securities are to be distributed by one or more underwriters shall
be parties to any underwriting agreements relating to the distribution of such
Registrable Securities and the representations and warranties by, and the other
agreements on the part of, the Company to and from the benefit of such
underwriters, shall also be made to and for the benefit of such Holders of
Registrable Securities.

                                       9
<PAGE>   10

                  6.  UNDERWRITING, DUE DILIGENCE.

                      (a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Agreement, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution
substantially to the effect and to the extent provided in Section 7 hereof and
the provision of opinions of counsel and accountants' letters to the effect and
to the extent provided in Section 5(a)(v) hereof. The Selling Holders on whose
behalf the Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by the Selling Holders on whose behalf the
Registrable Securities are to be distributed as are customarily contained in
underwriting agreements with respect to secondary distributions. Selling Holders
may require that any additional securities included in an offering proposed by a
Holder be included on the same terms and conditions as the Registrable
Securities that are included therein.

                      (b) In the event that any registration pursuant to Section
3 shall involve, in whole or in part, an underwritten offering, the Company may
require the Registrable Securities requested to be registered pursuant to
Section 3 to be included in such underwriting on the same terms and conditions
as shall be applicable to the other securities being sold through underwriters
under such registration. If requested by the underwriters for such underwritten
offering, the Selling Holders on whose behalf the Registrable Securities are to
be distributed shall enter into an underwriting agreement with such
underwriters, such agreement to contain such representations and warranties by
the Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contribution substantially to the
effect and to the extent provided in Section 7 hereof. Such underwriting
agreement shall also contain such representations and warranties by the Company
and such other person or entity for whose account securities are being sold in
such offering as are customarily contained in underwriting agreements with
respect to secondary distributions.

                      (c) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act, the Company shall give the Holders of such Registrable Securities and the
underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books and records and such opportunities
to discuss the business of the Company with its officers and the independent
public accountants who have certified the Company's financial statements as
shall be necessary, in the opinion of such Holder and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.

                                       10
<PAGE>   11

                  7.  INDEMNIFICATION AND CONTRIBUTION.

                      (a) In the case of each offering of Registrable Securities
made pursuant to this Agreement, the Company agrees to indemnify and hold
harmless each Holder, its officers and directors, each underwriter of
Registrable Securities so offered and each person, if any, who controls any of
the foregoing persons within the meaning of the Securities Act, from and against
any and all claims, liabilities, losses, damages, expenses and judgments, joint
or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement of any
litigation commenced or threatened, and shall promptly reimburse them, as and
when incurred, for any reasonable legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, liabilities or actions shall arise out of, or
shall be based upon, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement (or in any preliminary or
final prospectus included therein) or any amendment thereof or supplement
thereto, or in any document incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company shall not be liable to a particular Holder in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement, or
any omission, if such statement or omission shall have been made in reliance
upon and in conformity with information relating to such Holder furnished to the
Company in writing by or on behalf of such Holder specifically for use in the
preparation of the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Holder and shall survive the transfer of
such securities. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to each Holder, its officers and
directors, underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, further, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent or given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.

                      (b) In the case of each offering made pursuant to this
Agreement, each Holder of Registrable Securities included in such offering, by
exercising its registration rights hereunder, agrees to indemnify and hold
harmless the Company, its officers and directors and each person, if any, who
controls any of the foregoing within the meaning of the Securities Act (and if
requested by the underwriters, each underwriter who participates in the offering
and each person, if any, who controls any such underwriter within the meaning of
the Securities Act), from and against any and all claims, liabilities, losses,
damages,

                                       11
<PAGE>   12

expenses and judgments, joint or several, to which they or any of them may
become subject under the Securities Act or otherwise, including any amount paid
in settlement of any litigation commenced or threatened, and shall promptly
reimburse them, as and when incurred, for any legal or other expenses incurred
by them in connection with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or actions shall arise
out of, or shall be based upon, any untrue statement or alleged untrue statement
of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein a
material fact relating to the Holder required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that such untrue statement of a material fact contained in, or such
material fact relating to the Holder is omitted from, information relating to
such Holder furnished in writing to the Company by or on behalf of such Holder
specifically for use in the preparation of such registration statement (or in
any preliminary or final prospectus included therein). The foregoing indemnity
is in addition to any liability which such Holder may otherwise have to the
Company, or any of its directors, offices or controlling persons; provided,
however, that, as to any underwriter or any person controlling any underwriter,
this indemnity does not apply to any loss, liability, claim, damage or expense
wising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus if a copy of a
prospectus was not sent to given by or on behalf of an underwriter to such
person asserting such loss, claim damage, liability or action at or prior to the
written confirmation of the sale of the Registrable Securities as required by
the Securities Act and such untrue statement or omission had been corrected in
such prospectus; and provided, further, that in no event shall any such Holder
be liable for any amount in excess of the net proceeds received from the sale of
the Registrable Securities by such Holder in the subject offering.

                      (c) Procedure for Indemnification. Each party indemnified
under paragraph (a) or (b) of this Section 7 shall, promptly after receipt of
notice of any claim or the commencement of any action against such indemnified
party in respect of which indemnity may be sought, notify the indemnifying party
in writing of the claim or the commencement thereof; provided that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) of this Section 7, except to the extent the
indemnifying party was prejudiced by such failure, and in no event shall relieve
the indemnifying party from any other liability which it may have to such
indemnified party. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of

                                       12
<PAGE>   13

investigation; provided that each indemnified party, its officers and directors,
if any, and each person, if any, who controls such indemnified party within the
meaning of the Securities Act, shall have the right to employ separate counsel
reasonably approved by the indemnifying party to represent them if the named
parties to any action (including any impleaded parties) include both such
indemnified party and an indemnifying party or an affiliate of an indemnifying
party, and such indemnified party shall have been advised by counsel either (i)
that there may be one or more legal defenses available to such indemnified party
that are different from or additional to those available to such indemnifying
party or such affiliate or (ii) a conflict may exist between such indemnified
party and such indemnifying party or such affiliate, and in that event the fees
and expenses of one such separate counsel for all such indemnified parties shall
be paid by the indemnifying party. An indemnified party will not enter into any
settlement agreement which is not approved by the indemnifying party, such
approval not to be unreasonably withheld. The indemnifying party may not agree
to any settlement of any such claim or action which provides for any remedy or
relief other than monetary damages for which the indemnifying party shall be
responsible hereunder, without the prior written consent of the indemnified
party, which consent shall not be unreasonably withheld. In any action hereunder
as to which the indemnifying party has assumed the defense thereof with counsel
reasonably satisfactory to the indemnified party, the indemnified party shall
continue to be entitled to participate in the defense thereof, with counsel of
its own choice, but, except as set forth above, the indemnifying party shall not
be obligated hereunder to reimburse the indemnified party for the costs thereof.
In all instances, the indemnified party shall cooperate fully with the
indemnifying party or its counsel in the defense of each claim or action.

                     If the indemnification provided for in this Section 7 shall
for any reason be unavailable to an indemnified party in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
herein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party on the one hand or the indemnified party on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission,
but not by reference to any indemnified party's stock ownership in the Company.
In no event, however, shall a Holder be required to contribute in excess of the
amount of the net proceeds received by such Holder in connection with the sale
of Registrable Securities in the offering which is the subject of such loss,
claim, damage or liability. The amount paid or payable by an indemnified party
as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph shall be deemed to include, for
purposes of this paragraph, any legal or

                                       13
<PAGE>   14

other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claims. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

                  8.  RULE 144. The Company shall take such measures and file
such information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144.

                  9.  HOLDBACK.

                      (a) Each Holder agrees if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of
any securities of the Company, during the 30 days prior to and the 90 days after
any underwritten registration pursuant to Section 2 or 3 hereof has become
effective (or such shorter period as may be required by the underwriter), except
as part of such underwritten registration. The Company may legend and may impose
stop transfer instructions on any certificate evidencing Registrable Securities
relating to the restrictions provided for in this Section 9.

                      (b) The Company agrees, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of (other than pursuant to employee benefit plans), effect any public
sale or distribution of or otherwise dispose of its equity securities or
securities convertible into or exchangeable or exercisable for any such
securities during the 30 days prior to and the 90 days after any underwritten
registration pursuant to Section 2 or 3 hereof has become effective, except as
part of such underwritten registration and except pursuant to registrations on
Form S-4, S-8 or any successor or similar forms thereto.

                  10. TRANSFER OF REGISTRATION RIGHTS.

                      (a) A Holder may transfer all or any portion of its rights
under this Agreement to any transferee of Registrable Securities (each, a
"transferee"). The Holder making such transfer shall promptly notify the Company
in writing stating the name and address of any transferee and identifying the
amount of Registrable Securities with respect to which the rights under this
Agreement are being transferred and the nature of the rights so transferred. In
connection with any such transfer, the term "Holder" as used in this Agreement
shall, where appropriate to assign the rights and obligations of a Holder
hereunder to such direct transferee, be deemed to refer to the transferee holder
of such Registrable Securities.

                      (b) After any such transfer, the Holder making such
transfer shall retain its rights under this Agreement with respect to all other
Registrable Securities still owned by such Holder.

                                       14
<PAGE>   15

                      (c) Upon the request of the Holder making such transfer,
the Company shall execute a Registration Rights Agreement with such transferee
or a proposed transferee substantially similar to this Agreement.

                  11. MISCELLANEOUS.

                      (a) Injunctions. Each party acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. Therefore, each party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, such remedy being in addition to any other remedy to which such
party may be entitled at law or in equity.

                      (b) Severability. If any term or provision of this
Agreement shall be held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms and provisions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and each of the parties shall use its Best Efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term or provision.

                      (c) Further Assurances. Subject to the specific terms of
this Agreement, each of the parties hereto shall make, execute, acknowledge and
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.

                      (d) Waivers, etc. No failure or delay on the part of
either party (or the intended third-party beneficiaries referred to herein) in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure therefrom shall in any event be effective unless the same shall
be in writing and signed by an authorized officer of each of the parties, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.

                      (e) Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties, whether
written or oral, with respect to the subject matter hereof. The paragraph
headings contained in this Agreement are for reference purposes only, and shall
not affect in any manner the meaning or interpretation of this Agreement.

                                       15
<PAGE>   16

                      (f) Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original but all of which together shall be one and the same
instrument.

                      (g) Amendment. This Agreement may be amended only by a
written instrument duly executed by an authorized officer of the Company and an
authorized partner of the Investor.

                      (h) Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given when received if delivered personally, on the next business day if
sent by overnight courier for next business day delivery (providing proof of
delivery), when confirmation is received, if sent by facsimile or in 5 business
days if sent by U.S. registered or certified mail, postage prepaid (return
receipt requested) to the other parties at the following addresses (or at such
other address for a party as shall be specified by like notice):

                  (a) if to Investor, to:

                         The Yucaipa Companies
                         10000 Santa Monica Blvd., 5th Floor
                         Los Angeles, California 90067

                         Attn: Robert Bermingham
                         Facsimile:  310-789-7201

                      with a copy to:

                         Munger, Tolles & Olson LLP
                         355 South Grand Avenue, 35th Floor
                         Los Angeles, California 90071-1560
                         Attn: Judith T. Kitano
                         Facsimile:  213-687-3702

                  (b) if to the Company, to:

                         Cyrk, Inc.
                         3 Pond Road
                         Gloucester, Massachusetts 01930

                         Attn:
                         Facsimile:

                                       16
<PAGE>   17

                      with a copy to:

                         Choate, Hall & Stewart
                         Exchange Place
                         53 State Street
                         Boston, Massachusetts  02109
                         Attn:  Cameron Read
                         Facsimile:  617-248-4000

                      (i) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.

                      (j) Term. This Agreement shall remain in full force and
effect until there are no Registrable Securities outstanding or until terminated
by the mutual agreement of the Company and the Investor.

                      (k) Assignment. Except as provided herein, the parties may
not assign their rights under this Agreement and the Company may not delegate
its obligations under this Agreement.

                      (l) Priority of Rights. The Company agrees that it shall
not grant any registration rights to any third party unless such rights are
expressly made subject to the rights of the Holders in a manner consistent with
this Agreement. The Company also agrees that it shall not grant any Holder any
registration rights which are senior to or take priority over the registration
rights granted to all Holders under this Agreement.

                      (m) Construction. In entering into this Agreement, each
party represents and warrants that such party does so freely and voluntarily,
after having had the opportunity to meet and confer with such party's respective
attorneys regarding the contents and legal effect of this Agreement. Each party
represents and warrants that such party has full power and authority to enter
into and execute this Agreement. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party. In the event any claim is made by any party
relating to any conflict, omission, or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular party
or such party's counsel.

                                       17
<PAGE>   18

                  IN WITNESS WHEREOF, the Investor and the Company have caused
this Agreement to be duly executed by their authorized representative as of the
date first above written.

                               OVERSEAS TOYS, L.P.
                               By: OA3, L.L.C., its General Partner

                               --------------------------------------
                               By:   Robert Bermingham
                               Its: Secretary

                               CYRK, INC.,

                               By: /s/ Patrick D. Brady
                               Name: Patrick D. Brady
                               Title: Chief Executive Officer and President

                                       18

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