GRID PROMISSORY NOTE
                                  (LIBOR/PRIME)

$6,500,000                                                    Melville, New York
                                                              July 12, 2000


     FOR VALUE RECEIVED,  HAUPPAUGE DIGITAL,  INC. and HAUPPAUGE COMPUTER WORKS,
INC. (the  "Borrowers"  and each, a "Borrower"),  hereby  promises to pay to the
order of THE CHASE  MANHATTAN BANK (the "Bank") at the office of the Bank at 395
N. Service Road, 3rd Floor,  Melville,  New York 11747, in immediately available
funds,  the  principal  amount of SIX  MILLION  FIVE  HUNDRED  THOUSAND  DOLLARS
($6,500,000)  or such lesser amount as may  constitute the  outstanding  balance
hereof,  in lawful money of the United  States,  on the earlier of (i) March 31,
2001 (the  "Termination  Date") or (ii) the date set forth in the Grid  Schedule
attached  hereto as the maturity date for a Loan (as  hereinafter  defined) made
hereunder ("Maturity Date") and interest on the same as hereinafter provided.

     Interest/Grid Schedule

     The Bank is authorized to enter on the Grid  Schedule  attached  hereto (i)
the amount of each Loan made from time to time hereunder, (ii) the date on which
each Loan is made, (iii) the date on which each Loan shall be due and payable to
the Bank which in no event shall be later than the  Termination  Date,  (iv) the
interest  rate agreed  between the Borrower and the Bank as the interest rate to
be paid to the Bank on each Loan  (each  such  rate,  the  "Applicable  Interest
Rate"), which rate, at the Borrower's option in accordance herewith, shall be at
(a) the Prime  Rate  (for  "Prime  Rate  Loan(s)"),  or (b) LIBOR (as  hereafter
defined) plus 1.25% (for "Eurodollar  Loan(s)"),  (v) the amount of each payment
made  hereunder,  and  (vi)  the  outstanding  principal  balance  of the  Loans
hereunder from time to time,  all of which  entries,  in the absence of manifest
error,  shall be  rebuttably  presumed  correct  and  binding  on the  Borrower;
provided,  however,  that the failure of the Bank to make any such entries shall
not relieve the Borrower from its obligation to pay any amount due hereunder.

          Prime Rate Loans

(a)       "Prime Rate  Loans"  shall mean a loan with  interest  accruing at
          Prime Rate.  "Prime Rate shall mean the rate of interest  as is
          publicly  announced at the Bank's  principal office from time to
          time as its  prime  commercial  lending  rate.  The  unpaid  principal
          balance of Prime Rate Loans will bear  interest  equal at all times to
          the Prime Rate per annum in effect  from time to time.  Interest is to
          be computed on an actual/360 day basis, including any time extended by
          reason of Saturdays,  Sundays and holidays.  Interest shall be payable
          in arrears on a monthly basis on the first day of each month.


                                        1

<PAGE>

          Eurodollar Loans

(b)       "Eurodollar Loans" shall mean a loan with interest accruing at the
          Eurodollar  loan rate. Each Eurodollar Loan shall be made available by
          the Bank to the Borrower  from the lending  office  designated  by the
          Bank, and shall be in a minimum amount of $500,000.  Interest shall be
          determined by the Bank for periods of one, two,  three,  or six months
          (the  "Interest  Period")  (as  selected by the  Borrower);  provided,
          however,  no Interest Period shall extend beyond the Termination Date,
          and shall be at an annual rate equal to the London  Interbank  Offered
          Rate   ("LIBOR")   for   corresponding   deposits   of  U.S.   Dollars
          ("Eurodollars")  plus 1.25%  ("Eurodollar  Loan Rate").  LIBOR will be
          determined by the principal  London Office of the Bank at the start of
          each  Interest  Period.  Interest  shall  be  paid  at the end of each
          Interest Period or three month intervals, whichever is earlier, and is
          to be  calculated on the basis of the actual number of days elapsed in
          a year of 360 days. Drawdowns for Eurodollar Loans shall require three
          (3) Business Days' (as hereinafter  defined) notice prior to the first
          day of such Interest Period.

          Interest After Maturity

(c)       Interest after maturity on any Loan shall be payable at a rate two
          percent (2%) per annum above the Bank's  Prime Rate,  which rate shall
          be  computed  for  actual  number  of days  elapsed  on the basis of a
          360-day year and shall be adjusted as of the date of each such change,
          but in no event  higher than the maximum  permitted  under  applicable
          law.

          Prepayment

     (a) The Borrower shall have the right (i) at any time and from time to time
to prepay any Prime Rate Loan in full, or in part'  without  penalty and (ii) to
prepay any Eurodollar  Loan in full, or in part. on the last day of the Interest
Period relating to such Loan,  without  penalty.  Any prepayment of a Eurodollar
Loan on a day other than the last day of the  Interest  Period  relating to such
Loan shall be in full,  and upon at least three (3) Business Days' prior written
notice to the Bank, and shall be subject to the penalty  provisions of paragraph
(b) of this Section.  A notice of prepayment  shall specify the prepayment  date
(which shall be a Business Day) and the principal amount to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay the Loan in full on the date
and in the amount stated therein. Each prepayment hereunder shall be accompanied
by accrued pro-rated interest on the principal amount of the Loan to the date of
prepayment.

     (b) The Borrower  shall  reimburse the Bank on demand for any loss incurred
or to be  incurred  by it in the  reemployment  of  the  funds  released  by any
prepayment  of any Loan  permitted  under this  Section.  Such loss shall be the
difference  as  reasonably  determined by the Bank between the cost of obtaining
the funds for such Loan and any lesser  amount which may be realized by the Bank
in reemploying the funds received in prepayment  during the period from the date
of prepayment to the maturity date of the Loan.

                                        2

<PAGE>



          Discretionary Loans by the Bank

     The Bank may lend, in its sole  discretion in each  instance,  such amounts
(each a "Loan" and collectively the "Loans") as may be requested by the Borrower
hereunder,  which  Loans  shall  in no  event  exceed  $6,500,000  in  aggregate
principal  amount  outstanding at any time.  Any  Eurodollar  Loan shall be in a
minimum  principal  amount of $500,000 and in increments of $100,000.  Each such
request for a Loan shall be made jointly by the  President  and Chief  Executive
Officer of the Borrower,  both of which are hereby  designated and authorized by
the Borrower to request Loans and agree to the terms thereof  (including without
limitation the Applicable Interest Rate and Maturity Date with respect thereto).
The Borrower  shall give the Bank at least three (3) Business  Days notice prior
to the date of each drawdown and the end of each  Interest  Period (as hereafter
defined) specifying whether the Loan is a Prime Rate Loan or Eurodollar Loan and
the Interest Period applicable  thereto. In the event the Borrower shall fail to
provide  such  notice,  the Loan  shall be  deemed  to be a Prime  Rate Loan and
bearing  interest at the applicable Prime Rate and shall have an Interest Period
of one month.  The principal amount of each Loan shall be paid on the earlier to
occur of the Maturity Date applicable thereto, or the date upon which the entire
unpaid balance of this Note shall otherwise become due and payable.

          Borrowing Sublimit

     Notwithstanding anything in this Note to the contrary, no advances shall be
made  hereunder  and no  letters  of credit  shall be issued by the Bank for the
account of the undersigned  ("Letters of Credit") if, as a result  thereof,  the
aggregate  unpaid  principal  balance  of all  advances  made by the Bank to the
Borrower  hereunder  plus the  aggregate  undrawn  face amount of all Letters of
Credit, the aggregate  unreimbursed  amount of all drafts drawn under Letters of
Credit would exceed Six Million Five Hundred Thousand Dollars ($6,500,000).

          Increased Cost

     If at any time after the date hereof, the Board of Governors of the Federal
Reserve  System or any political  subdivision of the United States of America or
any other government, governmental agency or central bank shall impose or modify
any reserve or capital requirement on or in respect of loans made by or deposits
with the Bank or shall  impose on the Bank or the  Eurodollar  market  any other
conditions  affecting  Eurodollar  Loans,  and the result of the foregoing is to
increase the cost to (or, in the case of  Regulation D, to impose a cost on) the
Bank of making or maintaining  any  Eurodollar  Loans or to reduce the amount of
any sum  receivable by the Bank in respect  thereof,  by an amount deemed by the
Bank to be material,  then,  within 30 days after notice and demand by the Bank,
the Borrower shall pay to the Bank such  additional  amounts as will  compensate
the Bank for such increased cost or reduction; provided, that the Borrower shall
not be obligated to compensate  the Bank for any increased  cost  resulting from
the  application  of  Regulation  D as  required by the  definition  of Adjusted
Eurodollar  Rate, as such term is used in  Regulation D. Any such  obligation by
the Borrower to the Bank shall not be due and owing until the Bank has delivered
written notice to the Borrower. Failure by the Bank to provide such notice shall
not be deemed a waiver of any of its rights hereunder. A certificate of the Bank
claiming  compensation  hereunder and setting forth the additional amounts to be
paid to it hereunder and the method by which such amounts were calculated  shall
be conclusive in the absence of manifest error.


                                        3

<PAGE>

          Capital Adequacy

     If the Bank shall have determined that the  applicability of any law, rule,
regulation  or  guideline  adopted  pursuant  to or arising out of the July 1988
report of the Basle Committee on Banking  Regulations and Supervisory  Practices
entitled   "International   Convergence  of  Capital   Measurement  and  Capital
Standards",  or the  adoption  after  the date  hereof of any  other  law,  rule
regulation or guideline regarding capital adequacy,  or any change in any of the
foregoing or in the  interpretation or administration of any of the foregoing by
any governmental  authority,  central bank or comparable agency charged with the
interpretation  or  administration  thereof,  or  compliance by the Bank (or any
lending  office of the Bank) or the Bank's  holding  company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such  authority,  central bank or comparable  agency,  has or would have the
effect of reducing the rate of return on the Bank's capital or on the capital of
the  Bank's  holding  company,  if any,  .as a  consequence  of its  obligations
hereunder  to a level  below that which the Bank or the Bank's  holding  company
could have achieved but for such  adoption,  change or  compliance  (taking into
consideration  the Bank's  policies  and the  policies  of such  Bank's  holding
company with respect to capital  adequacy) by an amount deemed by the Bank to be
material,  then  from  time to time the  Borrower  shall  pay to the  Bank  such
additional  amount or amounts as will  compensate the Bank or the Bank's holding
company for any such reduction suffered.

          Indemnity

     The Borrower shall indemnify the Bank against any loss or expense which the
Bank may sustain or incur as a  consequence  of the  occurrence  of any Event of
Default or any loss or reasonable  expense  sustained or incurred in liquidating
or  employing  deposits  from third  parties  acquired to effect or maintain any
Eurodollar  Loan or any part  thereof  which the Bank may  sustain or incur as a
consequence of any default in payment of the principal amount of the Loan or any
part thereof or interest accrued thereon. The Bank shall provide to the Borrower
a statement,  supported where applicable by documentary evidence, explaining the
amount of any such loss or expense,  which  statement shall be conclusive in the
absence of manifest error.

          Change In Legality

     (a)  Notwithstanding  anything to the contrary contained  elsewhere in this
Note,  if any change  after the date hereof in any law or  regulation  or in the
interpretation   thereof  by  any  governmental   authority   charged  with  the
administration  thereof  shall  make it  unlawful  (based on the  opinion of any
counsel,  whether  in-house,  special or general,  for the Bank) for the Bank to
make or maintain any  Eurodollar  Loan or to give effect to its  obligations  as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the  Borrower  by the  Bank,  the  Bank  may  require  that  all  outstanding
Eurodollar Loans made hereunder be converted to Prime Loans,  whereupon all such
Eurodollar  Loans  shall be  automatically  converted  to Prime  Loans as of the
effective date of such notice as provided in paragraph (b) below.

     (b) For  purposes  of this  Section,  a notice to the  Borrower by the Bank
pursuant  to  paragraph  (a) above  shall be  effective,  if  lawful  and if any
Eurodollar Loans shall


                                        4

<PAGE>

then be  outstanding,  on the  last  day of the then  current  Interest  Period;
otherwise,  such  notice  shall  be  effective  on the  date of  receipt  by the
Borrower.

          Representations

     The  Borrower  represents  and  warrants  that (i) it is  duly,  organized,
validly  existing  and in good  standing  under  the  laws of the  state  of its
incorporation,  (ii) it has full power and authority to execute and perform this
Note,  (iii) that this Note when executed and  delivered in accordance  with its
terms will  constitute  the legal,  valid and binding  obligation of a Borrower,
enforceable  against such  Borrower in  accordance  with its terms,  and (iv) no
contractual restriction prevents the satisfactory  performance or payment of the
Note by the Borrower.

     The Year 2000 date change has not resulted in disruption of the  Borrower's
and its Subsidiaries' computer hardware, software,  databases, systems and other
equipment  containing  embedded  microchips  (including  systems  and  equipment
supplied by others or with which the  Borrower's  or its  Subsidiaries'  systems
interface),  or to the  Borrower's or its  Subsidiaries'  operations or business
systems,  or to the best of the Borrower's and its Subsidiaries'  knowledge,  to
the operations or business systems of the Borrower's  major vendors,  customers,
suppliers and counterparties. Borrower has no reason to believe that liabilities
and  expenditures  related  to the Year  2000  date-change  (including,  without
limitation, costs caused by reprogramming errors, the failure of others' systems
or  equipment,  and the  potential  liability,  if any,  of the  Borrower or its
Subsidiaries  for Year 2000 related costs incurred or disruption  experienced by
others) will result in an Event of Default or a Material Adverse Effect.

                                Events of Default

     If any of the following  events (each,  an "Event of Default")  shall occur
and be continuing:

        (i) the Borrower  shall fail to make payment when due of any principal
        of or interest on any Loan hereunder;  or
        (ii) the Borrower shall fail to perform or observe any other agreement,
        covenant, contained herein; or any  representation  or warranty  made by
        the  Borrower,  contained herein shall prove to have been incorrect in
        any material respect when made or given;  or
        (iii) the Borrower or any  guarantor  shall fail to guarantee the
        obligations under this note pursuant to their respective guaranties
        delivered to the Bank of all of the Borrower's  obligations to the Bank;
        or
        (iv) the  Borrower  shall fail to  provide  financial statements in a
        form acceptable to the Bank at the Bank's request from time  to  time;
        or
        (v)  the  Borrower  shall  default  in  any  other outstanding
        Liabilities (as hereinafter defined) except those disputed in good
        faith by  appropriate  proceedings,  provided  that  adequate reserves
        with respect  thereto  are  maintained  on the books of the Borrower in
        conformity with generally accepted accounting  principals; or
        (vi) the Borrower  shall be adjudged to be insolvent  (however such
        insolvency  may be evidenced),  or  proceedings  are instituted by the
        Borrower under the United States

                                        5

<PAGE>

        Bankruptcy Code or under any bankruptcy,  reorganization  or insolvency
        law or other law for the relief of debtors; or

        (vii)  proceedings are instituted  against the Borrower under the United
        States  Bankruptcy Code or under any  bankruptcy,  reorganization  or
        insolvency  law or other law for the relief of debtors which remain
        undismissed, undischarged  or  unbonded  for a period of 60 days;  or

        (viii)  there shall be a material adverse change, in the Bank's opinion,
         in the financial  condition  of the  Borrower  from  the  date  hereof;

        (ix) complete or partial liquidation or suspension of any business of
        the Borrower; or

        (x) dissolution,  merger, consolidation or reorganization of the
        Borrower;  or

        (xi) attachment,  distraint,  levy, execution or final  judgment against
        the Borrower or any of their  properties;  or

        (xii) any transfer,  assignment,  mortgage, pledge of or creation of a
        security  interest,  other than a  purchase  money  security  interest
        and/or  security  interest  arising in the ordinary course of business
        and/or by  operation  of law, in any  material  asset of the  Borrower
        without the consent of the Bank; and

then, in any such case the Bank may declare the Loan outstanding hereunder to be
forthwith due and payable,  together with accrued  interest,  whereupon the same
will become  forthwith due and payable,  without demand,  presentment,  protest,
notice of dishonor or any other notice or demand whatsoever. Notwithstanding the
foregoing,  upon a default  under  subsection  (vi)  hereunder,  this Note shall
become  immediately  due and payable  without  presentment,  demand,  protest or
notice of any kind, all of which are expressly waived.

          Definitions


     Business Day

          A Business  Day shall mean any day other  than a  Saturday,  Sunday or
     other day on which the Bank is  authorized or required by law or regulation
     to close,  and which is a day on which  transactions in dollar deposits are
     being carried out in London,  England for LIBOR Loans and New York City for
     Prime Loans.

     Interest Period

          (i) For  Eurodollar  Loans,  Interest  Period  shall  mean the  period
     commencing  on the date of such  Loan and  ending  1, 2, 3 or 6 months  (as
     selected by the Borrower and recorded on the grid  attached  hereto)  after
     the date of such Loan.

          (ii)For Prime Loans,  Interest  Period shall mean the period agreed to
     by the parties hereto,  however,  the Interest Period shall not extend past
     the Termination Date.

          If any  Interest  Period  would  end  on a day  which  shall  not be a
     Business Day, such Interest Period shall be extended to the next succeeding
     Business Day unless, with respect to Eurodollar Loans, such next succeeding
     Business Day would fall in the next calendar  month, in which case (x) such
     Interest Period shall end on the first  preceding  Business Day and (y) the
     Interest  Period for any  continuation of such


                                        6

<PAGE>

     Eurodollar  Loan shall end on the last  Business  Day of a calendar  month.
     Furthermore, no Interest Period mayextend beyond the Termination Date.

     Statutory Reserves

          Statutory Reserves shall mean a fraction (expressed as a decimal,  the
     numerator  of which is the number one and the  denominator  of which is the
     number  one  minus  the  aggregate  of  the  maximum  reserve   percentages
     (including,   without  limitation,   any  marginal,  special  emergency  or
     supplemental  reserves)  expressed as a decimal established by the Board of
     Governors of the Federal Reserve System and any other banking  authority to
     which the Bank is subject,  (a) with respect to the Adjusted Certificate of
     Deposit Rate, for new negotiable  time deposits in dollars clover  $100,000
     with maturities  approximately equal to the applicable Interest Period, and
     (b)  with  respect  to  the  Adjusted  Eurodollar  Rate,  for  Eurocurrency
     Liabilities as defined in Regulation D. Eurodollar Loans shall be deemed to
     constitute  Eurocurrency  Liabilities  and as such  shall be  deemed  to be
     subject  to such  reserve  requirements  without  benefit  of or credit for
     proration,  exceptions or offsets which may be available  from time to time
     to the Bank under such  Regulation D. Statutory  Reserves shall be adjusted
     automatically  on and as of the effective date of any change in any reserve
     percentage.

          Set-Off

     The Borrower hereby gives to the Bank a lien on,  security  interest in and
right of set-off  against  all  moneys,  securities  and other  property  of the
Borrower and the proceeds thereof, now or hereafter delivered to, remaining with
or in  transit  in  any  manner  to the  Bank,  its  correspondents,  affiliates
(including  Chase  Securities  Inc.)  or its  agents  from or for the  Borrower,
whether for safekeeping, custody, pledge, transmission,  collection or otherwise
or coming into possession,  control or custody of the Bank in any way, and also,
any balance of any deposit  accounts and credits of the Borrower  with,  and any
and all  claims  of the  Borrower  against  the  Bank at any time  existing,  as
collateral  security  for the payment of this Note and of all other  liabilities
and  obligations  now or hereafter owed by the Borrower to the Bank,  contracted
with or acquired by the Bank,  whether  joint,  several,  absolute,  contingent,
secured,   unsecured,   matured  or  unmatured   (all  of  which  are  hereafter
collectively  called  "Liabilities"),  hereby  authorizing  the Bank,  after the
occurrence and continuance of an Event of Default, at any time or times, without
prior notice, to apply such balances, credits or claims, or any part thereof, to
such Liabilities in such amounts as it may select, whether contingent, unmatured
or otherwise and whether any collateral  security therefor is deemed adequate or
not.  The  collateral  security  described  herein  shall be in  addition to any
collateral security described in any separate agreement executed by the Borrower
in favor of the Bank.

          Miscellaneous

     The Borrower  hereby waives  diligence,  demand,  presentment,  protest and
notice of any kind,  and assents to extensions of the time of payment,  release,
surrender or  substitution  of security,  or  forbearance  or other  indulgence,
without notice.


                                        7

<PAGE>

     This Note may not be changed, modified or terminated orally, but only by an
agreement  in writing  signed by the party to be  charged  and  consented  to in
writing by the party hereof.

     In the event the Bank or any  holder  hereof  shall  refer  this Note to an
attorney  for  collection,  the  Borrower  agrees to pay,  in addition to unpaid
principal  and  interest,  all the costs and expenses  incurred in attempting or
effecting collection hereunder, including reasonable attorney's fees of internal
or external counsel, whether or not suit is instituted.

     The Bank reserves the right to assign or sell  participations  in the Loans
or the Note,  including,  without  limitation,  to any Federal  Reserve Bank, in
accordance  with  applicable  law and the Borrower's  consent  thereto is hereby
deemed  granted.  In  connection  with such sale or  participation  the Bank may
provide any assignee or participant or prospective  assignee or participant with
information  of the  Borrower  previously  received  by  the  Bank,  subject  to
confidentiality requirements.

     In the event of any  litigation  with  respect to this Note,  THE  BORROWER
WAIVES  THE  RIGHT TO A TRIAL BY JURY and all  rights of setoff  and  rights to
interpose  counter  claims and  cross-claims.  The Borrower  hereby  irrevocably
consents to the  jurisdiction  of the courts of the State of New York and of any
Federal court located in such State in connection  with any action or proceeding
arising out of or relating to this Note. The execution and delivery of this Note
has been  authorized  by the Board of  Directors  and by any  necessary  vote or
consent of the stockholders of the Borrower.  The Borrower hereby authorizes the
Bank to complete this Note in any particulars according to the terms of the loan
evidenced  hereby.  This Note shall be governed by and  construed in  accordance
with the laws of the State of New York  applicable  to  contract  made and to be
performed in such State, and shall be binding upon the successors and assigns of
the Borrower and inure to the benefit of the Bank, its successors, endorsees and
assigns.

     If any term or  provision  of this Note shall be held  invalid,  illegal or
unenforceable  the validity of all other terms and provisions hereof shall in no
way be affected thereby.

HAUPPAUGE DIGITAL, INC.                    HAUPPAUGE COMPUTER WORKS, INC.

By:/s/ Kenneth R. Aupperle                 By:/s/ Kenneth R. Aupperle
   ------------------------------             ---------------------------
Name:  Kenneth R. Aupperle                 Name:  Kenneth R. Aupperle
Title:  President                          Title:  President


By:/s/ Kenneth Plotkin                     By: /s/ Kenneth Plotkin
   ------------------------------              --------------------------
Name:  Kenneth Plotkin                     Name:  Kenneth Plotkin
Title:  Chairman and CEO                   Title:  Chairman and CEO



                                        8

<PAGE>



                               PRIME RATE ADVANCES
<TABLE>
<CAPTION>

                                                                                      Unpaid
                                            Interest          Amount of               Principal
          Amount of        Maturity         Rate per          Principal               Balance             Notation
Date      Advance          Date             Annum             Paid                    Advance             Made by
----      ----------       ---------        -------           ---------------         -------             -------
<S>          <C>           <C>                 <C>               <C>                    <C>                <C>



</TABLE>

















                                        9

<PAGE>


                                 LIBOR ADVANCES

<TABLE>
<CAPTION>


                                                                                      Unpaid
                                            Interest          Amount of               Principal
          Amount of        Maturity         Rate per          Principal               Balance             Notation
Date      Advance          Date             Annum             Paid                    Advance             Made by
----      ----------       ---------        -------           ---------------         -------             -------
<S>       <C>               <C>               <C>                 <C>                   <C>                <C>


</TABLE>















                                       10

<PAGE>