ex10_1.htm


    FOURTH AMENDED AND RESTATED PROMISSORY
NOTE

    


    $700,000 

    Suffolk
County, New York

    As of
December 2, 2008

     

    

      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 SEVEN HUNDRED THOUSAND DOLLARS ($700,000), or such
lesser amount of all advances made by the Bank pursuant to the uncommitted line
of credit available to the Borrower pursuant to the Line Letter (as hereinafter
defined), in lawful money of the United States, on March 31, 2009 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 the date of each proposed Eurodollar Loan (as
hereinafter defined) or prior to 11:00 a.m. New York, New York time 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 Eurodollar Loan 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, 2009 (“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.

      


      Uncommitted Line of
Credit

      


      The Bank
has approved an uncommitted line of credit to the Borrower in the principal
amount not to exceed the face amount of this Note. The execution and delivery of
this Note and the acceptance by the Bank of this Note shall not be deemed or
construed to create any contractual commitment to lend by the Bank to the
Borrower.  The obligations under this Note represent reimbursement
obligations of the Borrower with respect to one or more letters of credit issued
by the Bank for the benefit of the Borrower.  This Note evidences the
Borrower’s obligations to repay such amounts.  The aggregate
outstanding principal amount of debt evidenced by this Note is the amount so
reflected from time to time in the records of the Bank.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      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 Line Letter, the Guaranty or
the Pledge Agreement, or if any provision of this Note, the Line Letter, 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 if the usual credit factors do not remain
favorable with respect to the Borrower in the sole determination of the Bank or
one or more conditions exist or events occur which have resulted or may result
in a material adverse change in the business, properties or financial condition
of the Borrower as determined in the sole discretion of the Bank or one or more
other conditions exist or events occur which the Bank deems materially adverse
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.           Line
Letter

    


    “Line
Letter” shall mean the Line Letter, dated as March 31, 2008, by the Bank in
favor of the Borrower, as same has been and may be further amended, restated,
extended, supplemented or modified, from time to time.

    


    I.         
   Prime
Loan

    


    
      	
               
      

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

            


    

    


    J.           Pledge
Agreement

    


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

    


    K.           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 Third Amended and Restated Promissory Note dated March 31,
2008 in the original principal amount of $5,000,000 issued by the Borrower in
favor of the Bank (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
      as of December 2, 2008

              	
                By:
      

              	/s/ Gerald
      Tucciarone	 
	 	 	Name:
      Gerald Tucciarone	 
	 	 	Title:   Chief
      Financial Officer 	 
	 	 	 	 


      

    

    
 

    


    ACKNOWLEDGMENT

    


    


    


    
      	
              STATE
      OF NEW YORK

            	
              )

            	 
      
	 
      	
              )

            	
              SS:

            
	
              COUNTY
      OF SUFFOLK

            	
              )

            	 
      


    

    


    


    On the
2nd day of December in the year 2008 before me, the undersigned, personally
appeared Gerald Tucciarone, 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 	 
	 	 	 	 
	 	 	 	 


      

    

     


    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    
 

    
      
        	
                GRID SCHEDULE

                 

              
	 
      	 
      	 
      	 
      	 
      
	
                 

                DATE

              	
                 

                TYPE

              	
                APPLICABLE

                INTEREST RATE

              	
                 

                AMOUNT

              	
                INTEREST

                PERIOD