Document:

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

                PERIODex10_2.htm

    
      ACCOUNT
PLEDGE AGREEMENT

      

      THIS PLEDGE SECURITY AGREEMENT,
dated as of December 2, 2008 (the “Agreement”), is made by HAUPPAUGE COMPUTER WORKS, INC.,
a Delaware corporation (“Pledgor”), and JPMORGAN CHASE BANK, N.A., a national banking
association (the “Bank”).

      

      RECITALS

       

      A.           The
Bank has made a $700,000 uncommitted secured line of credit available to the
Pledgor on the terms and conditions described in the Line Letter and the Note,
pursuant to which the Pledgor may request the issuance of letters of credit and
may receive other financial accommodations from the Bank and, in connection
therewith, may incur Liabilities (as hereinafter defined).

      

      B.           To
induce the Bank to continue to extend credit to the Pledgor on and after the
date hereof as provided in the Line Letter and the Note, Pledgor desires to
grant the Bank security and assurance to secure the payment and performance by
the Pledgor of the Liabilities and, to that effect, to grant, pledge and assign
to the Bank all of its right, title and interest in the Collateral (as defined
below).

      

      1.           Definitions.

       

      
        “Account”
means that account listed on Exhibit A.

        

        “Account
Assets” means Deposits and any other assets held from time to time in the
Account (all of which shall be considered “financial assets” under the
UCC).

        

        “Collateral”
means: (i) the Account Assets; (ii) all additions to, and proceeds, renewals,
investments and reinvestments of, the foregoing, whether or not listed on Exhibit A; and (iii)
all certificates, receipts and other instruments (including any certificates of
deposit) evidencing any of the foregoing.

        

        “Deposits”
means the deposits of the Pledgor with the Bank.

        

        “Event of
Default” shall have the meaning assigned to such term in the Note.

        

        “Liabilities”
shall have the meaning given to such term in the Note.

        

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

        

        “Note”
shall mean the Fourth Amended and Restated Promissory Note, in the original
principal amount of $700,000, dated as of date hereof, issued by the Pledgor in
favor of the Bank, as same may be amended, restated, modified or otherwise
supplemented from time to time.

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        
 

        “UCC”
means the Uniform Commercial Code in effect, from time to time, in the State of
New York.  Unless the context otherwise requires, all terms used in
this Agreement which are defined in the UCC will have the meanings stated in the
UCC.

      

       

      2.           Grant of Security
Interest.

      

      As
security for the payment of all the Liabilities, the Pledgor hereby pledges,
transfers and assigns to the Bank, and grants to the Bank a security interest
in, and right of set off against, the Collateral.  Notwithstanding
anything to the contrary herein, the security interest of the Bank in the
Collateral, at any time, shall not exceed the amount of the Liabilities, at such
time.

      

      3.           Agreements of the Pledgor and Rights
of the Bank.

      

      The
Pledgor agrees as follows and irrevocably authorizes the Bank to exercise the
rights listed below, at its option, for its own benefit, either in its own name
or in the name of the Pledgor, and appoints the Bank as its attorney-in-fact to
take all action permitted under this Agreement.

      

      (a)           Deposits: The Bank may: (i)
renew the Deposits on terms and for periods the Bank deems appropriate; (ii)
demand, collect, and receive payment of any monies or proceeds due or to become
due under the Deposits; (iii) execute any instruments required for the
withdrawal or repayment of the Deposits; and (iv) in all respects, deal with the
Deposits as the owner; provided that, as to (ii), (iii) and (iv) above, until
the occurrence of an Event of Default, the Bank will only take that action if,
in its judgment, failure to take that action would impair its rights under this
Agreement.

      

      (b)           General:   The
Bank may, in its name, or in the name of the Pledgor:  (i) file
financing statements under the UCC or any other filings or notices necessary or
desirable to create, perfect or preserve its security interest, all without
notice (except as required by applicable law and not waivable) and without
liability except to account for property actually received by it; and (ii) make
any notification or take any other action in connection with the perfection or
preservation of its security interest or any enforcement of remedies, and retain
any documents evidencing the title of the Pledgor to any item of the
Collateral.  Further, following the occurrence of an Event of Default,
the Bank may, in its name, or in the name of the Pledgor, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any item of the Collateral (but shall be under no
obligation to do so).

      

      The
Pledgor agrees that it will not (i) file or permit to be filed any termination
statement with respect to the Collateral or any financing or like
statement  with respect to the Collateral in which the Bank is not
named as the sole secured party, or (ii) sell, assign, or otherwise dispose of,
or pledge, or otherwise encumber the Collateral.  At the request of
the Bank, the Pledgor agrees to do all other things which the Bank may deem
necessary or advisable in order to perfect and preserve the security interest
and to give effect to the rights granted to the Bank under this Agreement or
enable the Bank to comply with any applicable laws or
regulations.  Notwithstanding the foregoing, the Bank does not assume
any duty with respect to the Collateral and is not required to take any action
to collect, preserve or protect its or the Pledgor’s rights in any item of the
Collateral.  The Pledgor releases the Bank and agrees to hold the Bank
harmless from any claims, causes of action and demands at any time arising with
respect to this Agreement, the use or disposition of any item of the Collateral
or any action taken or omitted to be taken by the Bank with respect
thereto.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      4.           Value of the
Collateral.

      

      The
Pledgor agrees that at all times the aggregate value of Collateral held pursuant
to this Agreement shall not be less than $700,000.

      

      5.           Representations and
Warranties.

      

      The
Pledgor represents and warrants to the Bank that the Pledgor is the sole owner
of the Collateral and the Collateral is free of all encumbrances except for the
security interest in favor of the Bank created by this Agreement.

      

      6.           Event of Default.

      

      Upon the
occurrence and during the continuance of an Event of Default, the Bank will have
the rights and remedies under the UCC and the other rights granted to the Bank
under this Agreement and may exercise its rights without regard to any premium
or penalty from liquidation of any Collateral and without regard to the
Pledgor’s basis or holding period for any Collateral.

      

      Upon the
occurrence and during the continuance of an Event of Default, the Bank may
transfer the Collateral into the name of the Bank or its nominee, and proceed
forthwith to collect, receive, appropriate and realize upon the Collateral, or
any part thereof or may assign or otherwise dispose of and deliver the
Collateral, or any part thereof, as the Bank in its sole and absolute discretion
deems appropriate without any liability for any loss due to decrease in the
market value of the Collateral during the period held, in any reasonable manner
permissible under the UCC (except that, to the extent required under the UCC,
the Bank shall provide the Pledgor ten (10) days prior notice of any such
sale).

      

      The Bank
may also, in its sole discretion: apply any portion of the Collateral, first, to all costs
and expenses of the Bank (including, without limitation, the reasonable legal
fees and expenses of legal counsel), second, to the
payment of interest on the Liabilities and any fees or commissions to which the
Bank may be entitled, third, to the payment
of principal of the Liabilities, whether or not then due, and fourth, to the
Pledgor.

      

      The
Pledgor will pay to the Bank all expenses (including reasonable attorneys’ fees
and legal expenses incurred by the Bank) in connection with the exercise of any
of the Bank’s rights or obligations under this Agreement or the
Note.  Upon the occurrence and during the continuance of an Event of
Default, the Pledgor will take any action requested by the Bank to allow it to
dispose of the Collateral.  Notwithstanding that the Bank may continue
to hold Collateral and regardless of the value of the Collateral, the Pledgor
will remain liable for the payment in full of any unpaid  balance of
the Obligations.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      7.           Governing Law;
Jurisdiction.

      

      This
Agreement and the rights and obligations of the parties hereunder shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of New York, without regard to its principles of conflicts of
laws.  THE PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK CITY,
COUNTY OF NASSAU, OR COUNTY OF SUFFOLK, OVER ANY ACTION OR PROCEEDING ARISING
OUT OF THIS AGREEMENT, AND THE PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN SUCH NEW
YORK STATE OR FEDERAL COURT.  THE PLEDGOR FURTHER AGREES THAT ANY
ACTION OR PROCEEDING BROUGHT AGAINST THE BANK MAY BE BROUGHT ONLY IN A NEW YORK
STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY.  THE
PLEDGOR HEREBY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING IN EITHER OF SAID COURTS BY MAILING THEREOF BY THE
BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS
ADDRESS SPECIFIED ON THE SIGNATURE PAGE HEREOF, OR AT THE PLEDGOR’S MOST RECENT
MAILING ADDRESS AS SET FORTH IN THE RECORDS OF THE BANK.

      

      The
Pledgor agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit or proceeding
in such state and hereby waives any defense on the basis of an inconvenient
forum.  Nothing herein shall affect the right of the Bank to serve
legal process in any other manner permitted by law or affect the right of the
Bank to bring any action or proceeding against the Pledgor or its property in
the courts of any other jurisdiction.

      

      8.           Waiver of Jury
Trial.

      

      THE
PLEDGOR AND THE BANK EACH WAIVE ANY RIGHT TO JURY TRIAL.

      

      9.           Notices.

      

      All
notices, statements, requests and demands given to or made upon the Bank or
Pledgor in accordance with the provisions of this Agreement shall be deemed to
have been given or made (a) if mailed, four (4) Business Days after such writing
shall have been deposited in the mail, postage pre-paid, or (b) if sent by
overnight courier, one (1) Business Day after such writing shall have been
deposited with the overnight courier, charges prepaid, addressed as
follows:

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      If to
Pledgor:         Hauppauge Computer
Works, Inc.

      91 Cabot
Court

      Hauppauge,
NY 11788

      Attn:  Gerald Tucciarone,
Chief Financial Officer

      

      If to the
Bank:       JPMorgan Chase Bank,
N.A.

      395 North Service Road

      Melville, New York 11747

      Attn:  Relationship Manager
– Hauppauge Computer Works, Inc.

      

      10.           Miscellaneous.

      

                   
 (a)            This
Agreement shall be binding on the Pledgor and its successors and assigns and
shall inure to the benefit of the Bank and its successors and assigns, except
that the Pledgor may not delegate any of its obligations hereunder without the
prior written consent of the Bank.

      

      (b)           No
amendment or waiver of any provision of this Agreement nor consent to any
departure by the Pledgor will be effective unless it is in writing and signed by
the Pledgor and the Bank and will be effective only in that specific instance
and for that specific purpose.  No failure on the part of the Bank to
exercise, and no delay in exercising, any right will operate as a waiver or
preclude any other or further exercise or the exercise of any other
right.

      

      (c)           The
rights and remedies in this Agreement are cumulative and not exclusive of any
rights and remedies which the Bank may have under law or under other agreements
or arrangements with the Pledgor.

      

      (d)           The
provisions of this Agreement are intended to be severable.  If for any
reason any provision of this Agreement is not valid or enforceable in whole or
in part in any jurisdiction, that provision will, as to that jurisdiction, be
ineffective to the extent of that invalidity or unenforceability without in any
manner affecting the validity or enforceability in any other jurisdiction or the
remaining provisions of this Agreement.

      

      (e)           The
Pledgor hereby waives presentment, notice of dishonor and protest of all
instruments included in or evidencing the Obligations or the Collateral and any
other notices and demands, whether or not relating to those
instruments.

      

      (f)           This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, taken together, shall constitute one
and the same instrument.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN WITNESS WHEREOF, the
Pledgor has signed this Agreement as of this 2nd day of December,
2008.

      

      

       

      
        
          	 	 PLEDGOR:	 
	 	 	 
	 	      
                  HAUPPAUGE
      COMPUTER WORKS, INC.

                	 
	 	 	 	 
	
                  Date

                	
                  By:
      

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

        

      

      
ACCEPTED:

      

      JPMORGAN
CHASE BANK, N.A.

      

      

      By:_____________________________

      Name:  Carolyn
B. Lattanzi

      Title:    Vice
President

      

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      

      DESCRIPTION
OF THE COLLATERAL

      

      

      The
following account and any successor account thereto and all assets held or to be
held therein:

      

      Bank
Name:                           JPMorgan
Chase Bank, N.A.

      395 North Service Road, Suite
302

      Melville,
New York 11747

      

      Account
Name:                    Hauppauge
Computer Works, Inc.

      

      Account
#:                            __________________–
Certificate of Deposit

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
          
            2105584.1

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