ex10_1.htm


    SECOND
      AMENDED AND RESTATED PROMISSORY
      NOTE

    


    $5,000,000                                                                                Suffolk
      County, New
      York

                                                                                            As
      of February 28,
      2007

    


    FOR
      VALUE RECEIVED, HAUPPAUGE COMPUTER
      WORKS,
      INC., a New York corporation (the “Borrower”), HEREBY PROMISES TO
      PAY to the
      order of JPMORGAN CHASE BANK,
      N.A. (the “Bank”), at its offices located at 395 North Service Road,
      Melville, New York 11747, or at such other place as the Bank or any holder
      hereof may from time to time designate, the principal sum of FIVEMILLIONDOLLARS
      ($5,000,000), or such
      lesser amount as may constitute the outstanding balance hereof, in lawful money
      of the United States, on March 31, 2008 or earlier as hereinafter referred
      to,
      and to pay interest in like money at such office or place from the date hereof
      on the unpaid principal balance of each Loan (as hereinafter defined) at the
      Eurodollar Rate or the Prime Rate (as hereinafter defined and provided for
      in
      the following paragraph) per annum, which shall be payable at the end of each
      Interest Period (as hereinafter defined) until such Loan(s) shall be due and
      payable (whether at maturity, by acceleration or otherwise) and thereafter,
      on
      demand.  Interest after maturity shall be payable at a rate three percent (3%) 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.  “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
      Rate.

    


               
      The Borrower shall give the
      Bank
      irrevocable written notice (or telephonic notice promptly confirmed in writing)
      not later than 11:00 a.m., New York, New York time, three Business Days prior
      to
      thedate of each proposed
      Eurodollar Loan (as
      hereinafter defined) or prior to 11:00 a.m. New York,
New
      Yorktime on the date of each
      proposed Prime
      Loan (as hereinafter defined).  Such notice shall be irrevocable and
      shall specify (i) the amount and whether the
      proposed borrowing shall
      be a Eurodollar Loan or a Prime
      Rate Loan, (ii) the initial Interest Period if a Eurodollar Loan,
      and (iv) the proposed date of
      borrowing.  Each borrowing of a EurodollarLoan
      shall be in an amount not less than
      $500,000 or,
      if greater, whole multiples of
      $100,000 in
      excess thereof.  The
      Bank is authorized to enter on the Grid Schedule attached hereto (i) the
      amount of each loan made from time to time hereunder (the “Loan”), (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 date shall be March 31, 2008 (“Maturity
      Date”), (iv) the applicable interest rate to be paid on each Loan which
      shall, at the Borrower's option in accordance herewith, be at (a) the
      Adjusted Eurodollar Rate plus one and 85/100 percent (1.85%) (the “Eurodollar
      Rate”) or (b) the Prime Rate minus one percent (1.0%) (such Loans, the
“Eurodollar Loan” or the “Prime Loan”), (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 conclusive 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.

    


    Prepayment

    


    (a)           
      No prepayments shall be permitted hereunder on any Loan while the Eurodollar
      Rate shall be applicable to such Loan on any date other than the last day of
      the
      applicable Interest Period. A Loan may be prepaid at any time while the Prime
      Rate shall be applicable to such Loan upon two days prior notice.

    


    (b)           
      The Borrower shall reimburse the Bank on demand for any loss incurred or to
      be
      incurred by it in the reemployment of funds released by any prepayment of the
      Loan made in contravention of the terms hereof. Such loss shall be the
      difference as reasonably determined by the Bank between the cost of obtaining
      the funds for the 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 end of the current Interest Period of such
      Loan.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Increased
      Costs

    


    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 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 definitions
      of
      Adjusted Eurodollar Rate.  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.

     

    Indemnity

    


    The
      Borrower shall indemnify the Bank
      against any net loss or expense which the Bank may sustain or incur as a
      consequence of the occurrence of any default hereunder 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 absent 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 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.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Events
      of
      Default.

    


    If
      the Borrower shall default in the
      punctual payment of any sum payable with respect to, or in the observance or
      performance of any of the terms and conditions of this Note, or any other
      agreement with or in favor of the Bank, or if a default or event of default
      that
      is accelerated shall occur for any reason under any such agreement, or in the
      event of default in any other material indebtedness of the Borrower exceeding
      $25,000 in the aggregate, or if any warranty, representation or statement of
      fact made in writing to the Bank at any time by an officer, partner or other
      designated representative of the Borrower is false or misleading in any material
      respect when made, or the Borrower fails on request to furnish any financial
      information or permit the inspection of its books or records, or if the Borrower
      shall be dissolved or shall fail to maintain its existence in good standing,
      or
      if the usual business of the Borrower shall be suspended or terminated, or
      if
      any levy, execution, seizure, attachment or garnishment shall be issued, made
      or
      filed on or against any material portion of the property of the Borrower, or
      if
      the Borrower shall become insolvent (however defined or evidenced), make an
      assignment for the benefit of creditors or make or send a notice of intended
      bulk transfer, or if a committee of creditors is appointed for, or any petition
      or proceeding for any relief under any bankruptcy, reorganization, arrangement,
      insolvency, readjustment of debt, receivership, liquidation or dissolution
      law
      or statute now or hereafter in affect (whether at law or in equity) is filed
      or
      commenced by or against the Borrower or any material portion of its property
      which, as to involuntary proceeding(s) are not dismissed within thirty (30)
      days, or if any trustee or receiver is appointed for the Borrower or any such
      property, or if a default or event of default shall occur under the Guaranty
      or
      the Pledge Agreement, or if any
      provision of this Note, the Guaranty or the Pledge Agreement shall, for any reason,
cease
      to be in full force and effect in
      accordance with its terms or the Borrower or the Guarantor shall so assert
      in
      writing, or any
      of the foregoing events shall occur
      with respect to the Guarantor or any other guarantor of the Borrower’s obligations hereunder
      (each an “Event of Default”) - then and in any such event, which non-monetary
      Events of Default continue unremedied for fifteen (15) days (except for
      voluntary bankruptcy which is an automatic Event of Default hereunder), in
      addition to all rights and remedies of the Bank under applicable law and
      otherwise, all such rights and remedies cumulative, not exclusive and
      enforceable alternatively, successively and concurrently, the Bank shall have
      the right immediately to set off against this note and/or any liabilities of
      the
      Borrower to the Bank all monies owed by the Bank in any capacity to the
      Borrower, whether or not due, and the Bank shall be deemed to have exercised
      such right to set off and to have made a charge against any such money
      immediately upon the occurrence of any of the foregoing events of default even
      though such charge is made or entered on the books of the Bank subsequent to
      those events.  Further the Bank may, at its option, declare any and
      all of the amounts owing under this Note to be due and payable, whereupon the
      maturity of the then unpaid balance hereof shall be accelerated and the same,
      together with all interest accrued hereon, shall forthwith become due and
      payable.

    


    Definitions

    


    A.           
      Adjusted Eurodollar
      Rate

    


    
      	
               

            	
              “Adjusted
                Eurodollar Rate” shall mean, with respect to any Eurodollar Loan for any
                Interest Period, an interest rate per annum (rounded upwards, if
                necessary, to the next 1/8 of 1%) equal to (i) the Eurodollar Rate in
                effect for such Interest Period and (ii) Statutory Reserves.
                

            


    

    


    
      	
               

            	
              “Eurodollar
                Rate” shall mean, with respect to any Eurodollar Loan for any Interest
                Period, the rate (rounded upwards, if necessary, to the next 1/8
                of 1%) at
                which dollar deposits approximately equal in principal amount to
                the
                Bank's Eurodollar Loan and for the maturity equal to the applicable
                Interest Period are offered by the Bank in immediately available
                funds in
                an Interbank Market for Eurodollars at approximately 11:00 a.m.,
                New York
                City time, two Business Days prior to the commencement of such Interest
                Period. 

            


    

    


    B.           
      Assessment
      Rate

    


    
      	
               

            	
              “Assessment
                Rate” shall mean for any date the annual rate (rounded upwards, if
                necessary, to the next higher 1/100 of 1%) most recently estimated
                by the
                Bank as the then current net annual assessment rate that will be
                employed
                for determining amounts payable by the Bank to the Federal Deposit
                Insurance Corporation (or any successor) for insurance by such Corporation
                (or such successor) of time deposits made in dollars at the Bank's
                domestic offices. 

            


    

    
      
        

      

    

    
    

    C.           
      Business
      Day

    


    
      	
               

            	
              “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 Eurodollar Loans and New York
                City for
                Prime Loans. 

            


    

    


    
      	
               

            	
              D.

            	
              Eurodollar
                Loan

            


    

    


    
      	
               

            	
              “Eurodollar
                Loan” shall mean a Loan bearing interest at the Eurodollar Rate plus
                1.85%. 

            


    

    


    
      	
               

            	
              E.

            	
              Guarantor

            


    

    


    
      	
               

            	
              “Guarantor”
                shall mean Hauppauge Digital, Inc., a Delaware corporation.
                

            


    

    


    
      	
               

            	
              F.

            	
              Guaranty

            


    

    


    
      	
               

            	
              “Guaranty”
shall
                mean
                the Guaranty, dated as of December 1, 2005 and reaffirmed as of the
                date
                hereof, by the Guarantor wherein the Guarantor guaranteed the obligations
                of the Borrower owing to the Bank, as amended, restated, supplemented
                or
                otherwise modified, from time to time.


            


    

    


    G.           
      Interest
      Period

    


    
      	
               

            	
              (i)
                For Eurodollar Loans, Interest Period shall mean the period commencing
                on
                the date of such Loan and ending 1 month after the date of such Loan
                (as
                selected by the Borrower and recorded on the Grid Schedule attached
                hereto), provided that. upon
                the expiration of the first Interest Period and each Interest Period
                thereafter, each Eurodollar Loan will be automatically continued
                with an
                Interest Period of the same duration, unless the
                Borrower shall notify
                the Bank that it intends to convert a Eurodollar Loan to a Prime
                Loan or
                if the Bank is prohibited from making Eurodollar Loans, in accordance
                with
                provisions set forth in this
                Note.

            


    

    


    
      	
               

            	
              (ii)
                For Prime
                Loans, Interest Period shall mean the last day of each calendar
                month during the term hereof and on the date on which an Prime Loan
                is
                converted to a Eurodollar Loan. 

            


    

    


    
      	
               

            	
              No
Interest
                Period shall extend past the Maturity Date.  In addition, 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.
                

            


    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    H.           
      Prime
      Loan

    


    
      	
               

            	
              “Prime
                Loan” shall mean a Loan bearing interest at the Prime Rate.
                

            


    

    


    I.           
      Pledge
      Agreement

    


    “Pledge
      Agreement” shall mean the Share Pledge Agreement, dated as December 1, 2005 and
      reaffirmed of the date hereof, between the Guarantor and the Bank, as amended,
      restated, supplemented or modified, from time to time.

    


    J.           
      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 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. 

            


    

    


    Miscellaneous

    


    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 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 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, including, without limitation, the Pledge Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Notices

    


    Any
      notices, requests and demand to or
      upon the respective parties hereto to be effective shall be in writing (or
      by
      telex, fax or similar electronic transfer confirmed in writing), and, unless
      otherwise expressly provided herein, shall be deemed to have been duly given
      or
      made (a) when delivered by hand or (b) if given by mail, on the third business
      day after deposited in the mails by certified mail, return receipt requested,
      or
      (c) if by telex, fax or similar electronic transfer, when sent and receipt
      has
      been confirmed, addressed as follows:

    


    
      	
               

            	
              (i)

            	
              if
                to the Bank to: 

            


    

    


    
      	
               

            	
              JPMorgan
                Chase Bank, N.A. 

            


    

    
      	
               

            	
              395
                North Service Road, Suite 302 

            


    

    
      	
               

            	
              Melville,
                New York 11747 

            


    

    
      	
            	
              Telephone
                #

            	
              (631)
                755-5209 

            


    

    
      	
              Fax
                #

            	
              (631)
                755-5101 

            


    

    
      	
            	
              Attention:

            	
              Jim
                Maron, Vice President 

            


    

    


    
      	
               

            	
              (ii)

            	
              if
                to the Borrower to: 

            


    

    


    
      	
               

            	
              Hauppauge
                Computer Works, Inc.

              91 Cabot Court

              Hauppauge, NY 11788

              Telephone
                #          (631)
                434-1600

              Fax
                #                      
                (631) 434-3198

              Attention:             
                Gerald Tucciarone, Secretary

            


    

     

    
      	
               

            	
              (iii)

            	
              As
                to each such party at such other address as such party shall have
                designated to the other in a written notice comply with the provisions
                hereof. 

            


    

    


    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.

    


    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, whether or not suit is instituted.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    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.  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.

    


    This
      Note is an amendment and
      restatement of, and is being issued in replacement of and substitution for,
      the
Promissory
      Note, in the principal amount of $3,000,000, dated as of December 1, 2005 issued
      by the Borrower in favor of the Bank (as same may have amended, restated,
      supplemented or modified through the date hereof, collectively the "Original
      Note").  The
      execution and delivery of this Note shall not be construed to have constituted
      a
      repayment of any principal of, or interest on, the Original
      Note.

    


    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
                COMPUTER WORKS,
                INC.	 
	 	 	 	 
	
                DATED:
                  February 28,
                  2007                    
                  

              	
                By:
                  

              	/s/ Kenneth
                Plotkin	 
	 	 	Name: Kenneth
                Plotkin	 
	 	 	Title:  Chief
                Executive Officer	 
	 	 	 	 


      

    

     

    ACKNOWLEDGMENT

    


    
      STATE
        OF
        NEW YORK        )

                          )    SS:

      
        COUNTY
          OF
          SUFFOLK        )

      

       

       

    

    On
      the
      28th day of February in the year 2007 before me, the undersigned, personally
      appeared Kenneth Plotkin, personally known to me or proved to me on the basis
      of
      satisfactory evidence to be the individual whose name is subscribed to the
      within instrument and acknowledged to me that he executed the same in his
      capacity, and that by his signature on the instrument, the individual, or the
      person upon behalf of which the individual acted, executed the
      instrument.

    


    


    /s/
      Marianne
      Waterbury               
 

                
      Notary
      Public

    


    


    [NOTARY
      STAMP]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    GRID
      SCHEDULE

    


    


    APPLICABLE                                                                                             
      INTEREST

    DATE                       
      TYPE                       
INTEREST
      RATE                                           
AMOUNT                               
      PERIOD