Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HAUPPAUGE DIGITAL, INC.
(Name of Registrant as Specified in Its Charter)
HAUPPAUGE DIGITAL, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies: _______________________________________________
(2) Aggregate number of securities to which transaction
applies: ______________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
________________________________________________________
(4) Proposed maximum aggregate value of
transaction:____________________________________________
(5) Total Fee Paid: _____________________________________
[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid: _______________________________
(2) Form, Schedule or Registration Statement No.: ___________
(3) Filing party:____________________________________________
(4) Date filed:_____________________________________________
<PAGE>
HAUPPAUGE DIGITAL, INC.
91 Cabot Court
Hauppauge, New York 11788
____________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________________________________________________
The annual meeting of the stockholders of Hauppauge Digital, Inc.
(the "Company") will be held on March 5, 1996 at 10:00 a.m., local
time, at the offices of the Company at 91 Cabot Court, Hauppauge,
New York 11788. The meeting is called for the following purposes:
ELECTION OF DIRECTORS
The election of 5 directors to hold office for a term of one (1)
year and until the election and qualification of their respective
successors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
To ratify the appointment of BDO Seidman, LLP, Certified Public
Accountants, as independent auditors for the fiscal year ending
September 30, 1996.
APPROVAL OF 1996 NON-QUALIFIED STOCK OPTION PLAN
To approve the adoption of the 1996 Non-Qualified Stock Option Plan
for the issuance of up to 250,000 shares of the Company's common
stock, par value $0.01 per share, in the form attached hereto as
Exhibit "1".
TRANSACTION OF OTHER BUSINESS
To transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on January 19, 1996
are entitled to notice of, and to vote at, this meeting. Sending
in your proxy will not prevent your attending and voting at the
meeting in person should you later decide to do so.
The accompanying form of proxy is solicited by the board of
directors of the Company. Reference is made to the enclosed proxy
statement for further information with respect to the business to
be transacted at the meeting.
If you do not expect to attend the meeting in person, please sign
and date the enclosed proxy and mail it promptly in the enclosed
envelope.
By order of the board of directors.
Dated: January 24, 1996
KENNETH PLOTKIN
Secretary
<PAGE>
<PAGE>
HAUPPAUGE DIGITAL, INC.
91 Cabot Court
Hauppauge, New York 11788
__________________________________
PROXY STATEMENT
__________________________________
The proxy statement mailed to stockholders commencing on or about
January 29, 1996 is furnished in connection with the solicitation
of proxies by the board of directors of Hauppauge Digital, Inc.
(the "Company") in connection with the annual meeting of
stockholders (the "Annual Meeting") of the Company to be held March
5, 1996 at 10:00 a.m., local time, at the offices of the Company
at 91 Cabot Court, Hauppauge, New York 11788. Proxies will be
voted in accordance with directions specified thereon and otherwise
in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be
voted in favor of the action described in the proxy statement.
A proxy in the enclosed form may be revoked at any time, prior to
it being voted at the Annual Meeting by sending a subsequently
dated proxy or by giving written notice to the Company, in each
case to the attention of Kenneth Plotkin, Secretary, at the address
set forth above. Stockholders who attend the Annual Meeting may
withdraw their proxies at any time before their shares are voted by
voting their shares in person.
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the notice,
proxy and proxy statement, the handling and tabulation of proxies
received and the charges of brokerage houses and other
institutions, nominees or fiduciaries in forwarding such documents
of the proxy material to beneficial owners, will be paid by the
Company. In addition to the mailing of the proxy material, such
solicitation may be made in person or by telephone and telegraph by
directors, officers or regular employees of the Company. It is
estimated that the total cost of proxy solicitations by the Company
will not exceed $2,500.
The matters to be considered at this Annual Meeting will be the
election of directors for the ensuing year, the approval of the
1996 Non-Qualified Stock Option Plan and the ratification of the
appointment of BDO Seidman, LLP, Certified Public Accountants as
independent auditors. The Company is aware of no other matters to
be presented for action at the Annual Meeting.
<PAGE>
<PAGE>
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Company's voting securities consist solely of common stock,
$.01 par value (the "Common Stock"). Holders of Common Stock at
the close of business on January 19, 1996 will be entitled to vote.
Each share of Common Stock entitles the holder to one (1) vote on
each matter to be voted upon. On the record date there were
outstanding 2,756,183 shares of Common Stock, exclusive of treasury
shares.
STOCK OWNERSHIP OF DIRECTORS
The following table sets forth, as of January 19, 1996, the number
of shares of Common Stock owned by each of the present directors of
the Company, together with certain information with respect to
each:
Shares of Percent
Director Stock Owned of
Name Age Since Beneficially Class
- ----- --- ----- ------------ -----
Kenneth R. Aupperle (1)(3) 38 1994 287,610 10.4%
Kenneth Plotkin (2)(3) 44 1994 287,550 10.4%
Laura Aupperle (1) 39 1994 287,550 10.4%
Dorothy Plotkin (2) 44 1994 287,550 10.4%
Leonard A. Neuhaus (4) 37 1995 --- ---
_________________
(1) Kenneth R. Aupperle and Laura Aupperle are husband and wife.
Ownership set forth does not include shares of Common Stock
owned by the spouse of the other individual.
(2) Kenneth Plotkin and Dorothy Plotkin are husband and wife.
Ownership set forth does not include shares of Common Stock
owned by the spouse of the other individual. Ownership set
forth also does not include 10,000 class A warrants (the
"Class A Warrants") held of record by Mr. Plotkin's father as
custodian for the Plotkin's son and daughter. Each Class A
Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $3.75 per share from January 10,
1996 until January 9, 2000. The Plotkins disclaim beneficial
ownership of such Class A Warrants.
(3) Ownership does not include an option to purchase 150,000
shares of Common Stock granted to Kenneth R. Aupperle and
Kenneth Plotkin on January 10, 1995. See "Executive
Compensation - Option/SAR Grants in Last Fiscal Year" for a
description of the option.
<PAGE>
(4) Does not include options to purchase 133,333 units of the
Company's securities, issued pursuant to the Underwriting
Agreement in connection with the Company's 1995 public
offering, owned by Lew Lieberbaum & Co., Inc. ("LLC"), of
which he is a stockholder, officer, and director. Each unit
consists of one share of Common Stock and one Class A Warrant
(the "Units"). Such options are exerciseable at $4.41 per
Unit from January 10, 1996 until January 9, 2000.
All executive officers and directors as a group (7 persons) are the
beneficial owners of 1,211,360 shares, as of January 19, 1996,
which represents 43.7% of the outstanding shares of the Company.
Kenneth R. Aupperle is a co-founder of the Company. He has been
the Company's president and chief operations officer since the
Company's incorporation. Mr. Aupperle hold a BS in Electrical
Engineering and an MS in Computer Science from Potytechnic
University, along with additional work toward a Ph.D. He has
lectured on computer science at Polytechnic University since 1979.
Kenneth Plotkin is a co-founder of the Company. He has been the
Company's chairman of the board of directors and chief executive
officer since the Company's incorporation. Mr. Plotkin is
presently Secretary of the Company and is vice-president in charge
of marketing. He holds a BS and an MS in Electrical Engineering
from the State University of New York at Stony Brook.
Laura Aupperle has served as director of the Company since the
Company's incorporation. She worked for the Company on a full time basis
in sales and production from 1983 to 1990 and on a part time basis
in production planning since May, 1994. She is the wife of Kenneth
R. Aupperle.
Dorothy Plotkin has served as director of the Company since the
Company's incorporation. She has worked for the Company on a full
time basis since 1982 in various capacities and presently in sales
and as a shipping manager. She is the wife of Kenneth Plotkin.
Leonard A. Neuhaus has served as a director of the Company since
January 10, 1995, the effective date of the Company's 1995 public
offering, in accordance with LLC's right to designate a nominee
pursuant to the letter of intent between the Company and LLC dated
July 20, 1994. Mr. Neuhaus is a co-founder, stockholder, chief
operations officer and director of LLC, the Company's underwriter
for its 1995 public offering. From June 1988 through March 1990,
Mr. Neuhaus was chief financial officer of Global Capital Group,
Inc. / Global Capital Securities, Inc. a registered broker-dealer.
Mr. Neuhaus only devotes a limited portion of his time to the
affairs of the Company.
The National Association of Securities Dealers, Inc. ("NASD")
<PAGE>
recently alleged that LLC and others, including Mr. Neuhaus, in
1991, engaged in market manipulation, inaccurately maintained books
and records and failed to adequately supervise the activities of
LLC's personnel in connection with the trading for LLC's account of
warrants which were part of a public offering of units of
convertible preferred stock and warrants of a company for which LLC
had acted in 1991 as managing underwriter. In order to
expeditiously resolve this matter and without admitting or denying
these allegations, in January 1995, Mr. Neuhaus and others
voluntarily entered into a Letter of Acceptance, Waiver and Consent
with the NASD pursuant to which Mr. Neuhaus was censured and fined
by the NASD, agreed to pay with LLC and others restitution to
customers and was suspended for associating with any NASD member
for a three month period.
ELECTION OF DIRECTORS
The bylaws of the Company provide that the number of the directors
of the Company shall be a minimum of three (3) and a maximum of
seven (7) and that directors shall be elected by a plurality of the
votes cast. The board of directors has chosen and designated the
above five (5) nominees. At the Annual Meeting, five (5) directors
are to be elected.
Five (5) meetings of the board of directors were held during the
fiscal year ended September 30, 1995. No director attended fewer
than seventy-five (75%) percent of such meetings.
Proxies in the enclosed form will be voted for the nominees named
above. Authority may be withheld for any nominee. Under SEC
rules, boxes and a designated blank space are provided on the proxy
card for shareholders to mark if they wish withhold authority to
vote for one or more nominees for director. In addition,
stockholders may nominate additional nominees as candidates for the
position as director. Although the board of directors does not
anticipate that any nominee will be unavailable for election, in
the event of such occurrence, the proxy will be voted for such
substitute, if any, as the board of directors may designate.
Proxies will not vote for a greater number of persons than the
number of nominees named.
<PAGE>
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
The following sets forth the ownership with respect to each person
known to own beneficially more than 5% of the Company's Common
Stock as of January 19, 1996:
Name and Amount and Nature Percent
Title address of Nature of Beneficial of
of Class Beneficial Owner Ownership(1) Class
- -------- ---------------- ------------ -----
Common Stock Kenneth R. Aupperle 287,610 direct 10.4%
$.01 par value 91 Cabot Court and beneficial
Hauppauge, NY 11788
Common Stock Kenneth Plotkin 287,550 direct 10.4%
$.01 par value 91 Cabot Court and beneficial
Hauppauge, NY 11788
Common Stock Laura Aupperle 287,550 direct 10.4%
$.01 par value 91 Cabot Court and beneficial
Hauppauge, NY 11788
Common Stock Dorothy Plotkin 287,550 direct 10.4%
$.01 par value 91 Cabot Court and beneficial
Hauppauge, NY 11788
Common Stock Jay Rasmussen 140,000 direct 5.1%
$.01 par value 2212 E. Little and beneficial
Cloud Circle
Sandy, Utah 84093
_________________
(1) See footnotes to table under "Stock Ownership of Directors".
EXECUTIVE COMPENSATION
Summary
The following describes the components of the total compensation of
the CEO of the Company. No executive had a total annual salary and
bonus for the year ended September 30, 1995 which exceeded
$100,000.
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long term compensation
------------------------ --------------------------------------
Awards Payouts
------------------ -----------------
Other Securities All
Name and annual Restricted underlying LTIP other
principal Salary Bonus compen- stock options / payouts compen
position Year ($) ($) sation($) award(s)($) SARs (#) ($) sation($)
- -------- ---- ------ ----- ---------- --------- ---------- ------ --------
Kenneth 1995 56,083 --- 1,600(1) --- --- --- ---
Plotkin,
CEO 1994 29,261 --- 1,112(1) --- --- --- ---
______________
(1) Represents non-cash compensation in the form of the use of a car and
related expenses.
Stock Options
OPTION/SAR GRANTS IN LAST FISCAL YEAR
[Individual Grants]
Number of Percent of
securities total options /
underlying SARs granted Exercise
Options/SARs in fiscal or base Expiration
Name granted (#)(1) year (1) price ($/Sh) Date
- ---- ------------- ------------ ------------ ----
Kenneth Plotkin, 150,000 50% 3.15 1/09/05
CEO
_______________
(1) On January 10, 1995, Kenneth Plotkin was granted an option to purchase
150,000 shares of Common Stock at $3.15 per share, subject to
adjustment. The option shall not be exercisable for a period of ten
years except as follows: For the first full fiscal year after the date
of grant and for each of the four years thereafter, should the Company
attain an audited annual pre-tax income of at least $1,000,000, options
to purchase 30,000 shares of Common Stock shall then become immediately
exercisable. If the Company fails to attain the $1,000,000 plateau
during the first year, should the Company's combined pre-tax income for
the first two full fiscal years exceed $2,000,000, then options to
purchase 60,000 shares of Common Stock shall then become immediately
exercisable. Kenneth R. Aupperle was also granted a similar option.
<PAGE>
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number
of securities Value
underlying unexercised in-
unexercised the-money options
Shares SARs at FY-end (#) SARs at FY-end($)
acquired on Value exercisable / exercisable /
Name exercise (#) realized($) unexersisable unexercisable(1)
- ----- ------------ ----------- ------------- ----------------
Kenneth Plotkin,
CEO -0- -0- -0- / 150,000 -0- / -0-
______________
(1) See footnote (1) above in Option/SAR Grants in Last fiscal Year.
Compensation of Directors
Directors of the Company are not compensated solely for being on the board of
directors.
Employment Agreements
On January 10, 1995, Kenneth R. Aupperle and Kenneth Plotkin each entered
into a three year employment agreement with the Company to serve as
president, and chief operations officer, and chief executive officer,
vice-president in charge of marketing and secretary, respectively. The
agreements provide for an annual salary of $60,000 during the first year,
$80,000 during the second year and $100,000 during the third year. Each
agreement provides for disability benefits, a car allowance of $400 per
month, reasonable reimbursements for automobile expenses and also medical
insurance as is standard for the employees of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than
ten percent of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission. Executive officers, directors and greater than 10%
beneficial shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and
directors, the Company believes that during the fiscal year ended September
30, 1995, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were complied
with.
<PAGE>
1994 INCENTIVE STOCK OPTION PLAN
On August 2, 1994, the Company adopted an Incentive Stock Option Plan
("ISO"), as defined in section 422 of the Internal Revenue Code, as amended.
200,000 shares of Common Stock have been reserved for issuance under the ISO.
Pursuant to the ISO, options may be granted for up to ten years with exercise
prices (A) during the first two years after January 10, 1995, of no less than
the greater of $3.15, or the fair market value of the Common Stock on the
date of grant, or (B) thereafter, of no less than fair market value of the
Common Stock on the date of grant. No options have been granted to date under
the ISO.
CERTAIN TRANSACTIONS
On August 2, 1994, Kenneth R. Aupperle, Laura Aupperle, Kenneth Plotkin and
Dorothy Plotkin exchanged all of their issued and outstanding shares of the
Company's two wholly owned subsidiaries for 1,280,000 shares of Common Stock
of the Company, representing all of the outstanding shares of the Company at
the time.
On July 6, 1995, Messrs. Aupperle and Plotkin and their wives transferred an
aggregate of 99,740 shares of Common Stock to certain key employees of the
Company, as incentive to them. No consideration was paid with respect to any
transfer of less than 1,000 shares of Common Stock to any such employee, and
$0.03 per share was paid to cover the costs of any transfer of more than
1,000 shares of Common Stock to any employee. John Casey and Gerald
Tucciarone, executive officers of the Company, were transferred 38,100 and
2,000 shares of Common Stock, respectively.
The Company leases its facilities from a partnership consisting of Messrs.
Aupperle and Plotkin and their wives (the "Partnership") under a lease
agreement dated February 7, 1990 for a term of 20 years commencing February
1, 1990. For the nine months ended September 30, 1994, the Company obtained
a rent concession from the Partnership in the amount of $68,118. The Company
did not obtain a rent concession for fiscal 1995 and does not anticipate
obtaining rent concessions in the future. Rent is currently at the annual
rate of $282,604. The rent is payable in equal monthly installments and
increases at a rate of 5% per year. The premises are subject to two mortgages
which are guaranteed by the Company upon which the outstanding principal due
as of September 30, 1995 was $1,260,543. The Company pays the taxes and
operating costs of maintaining the premises.
PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S 1996
NON-QUALIFIED OPTION PLAN
Introduction
The board of directors unanimously recommends that the stockholders approve
the 1996 Non-Qualified Stock Option Plan. A copy of the 1996 Non-Qualified
Plan is annexed hereto as Exhibit "1" and will become effective immediately
upon stockholder approval.
<PAGE>
Description of the 1996 Non-Qualified Stock Option Plan
On December 14, 1995, the board of directors authorized the adoption of the
1996 Non Qualified Option Plan (the "1996 Non-Qualified Plan"). The adoption
of the 1996 Non-Qualified Plan is subject to the approval of the Company's
stockholders at the Annual Meeting on March 5, 1996. The purpose of the 1996
Non-Qualified Plan is to encourage and reward key employees, consultants,
individuals and other entities ("Participants") by giving them an opportunity
to share in any future success of the Company without burdening the Company's
cash resources. The 1996 Non-Qualified Plan authorizes stock options to
Participants to acquire shares of the Company's Common Stock.
The 1996 Non-Qualified Plan authorizes the grant of 250,000 shares subject to
adjustment as provided therein. No options have been granted under the 1996
Non-Qualified Plan to date. The 1996 Non-Qualified Plan terminates ten (10)
years after stockholder approval. Options granted shall specify the exercise
price, the duration of the option, the number of shares to which the option
applies and such other terms and conditions not inconsistent with the 1996
Non-Qualified Plan as the board of directors or committee administering the
1996 Non-Qualified Plan shall determine. Payment of the exercise price for
options under the 1996 Non-Qualified Plan is to be made in cash, by the
exchange of Common Stock having equivalent value or through a "Cashless
Exchange". If a Participant elects to utilize a Cashless Exercise, he shall
be entitled to a credit equal to the amount of that equity by which the
current Fair Market Value exceeds the option price on that number of options
surrendered and to utilize that credit to exercise additional options held by
him that such equity could purchase. There shall be canceled that number of
options utilized for the credit and for the options exercised for such
credit. In the event of any change of the outstanding Common Stock by reason
of a stock split, stock dividend, combination, reclassification or exchange
of shares, recapitalization, merger, consolidation or other similar event,
the number of shares available for options and the price thereof shall be
proportionately adjusted.
The description of certain features of the 1996 Non-Qualified Plan set forth
herein is subject to and qualified in its entirety by the full text of the
1996 Non-Qualified Plan, which is attached as Exhibit "1" to this Proxy
Statement.
Reasons for the 1996 Non-Qualified Plan
The 1996 Non-Qualified Plan, unlike the 1994 ISO, does not qualify for
treatment as an incentive stock option plan under the Internal Revenue Code.
There are various tax benefits which could accrue to the Company upon the
exercise of non-qualified stock options that may not be available to the
Company upon the exercise of qualified incentive stock options.
The purpose of the 1996 Non-Qualified Plan is to provide greater flexibility
and increased effectiveness in motivating the Company's Participants to
provide for the Company's long term growth and business success.
<PAGE>
Federal Income Tax Consequences
The Company believes that under existing federal income tax laws, the grant
of non-qualified stock options generally will create no tax consequences for
a Participant or the Company. A Participant must generally recognize
ordinary income equal to the difference between the exercise price and the
fair market value of the shares received on the date of exercise of the
options. The Company will be entitled to deductions to the extent that
Participants recognize ordinary income upon the exercise of the options.
Special tax rules and elections apply under certain circumstances which may
affect the timing and measurement of income recognized in connection with
awards under the 1996 Non-Qualified Plan, particularly in the case of
directors and officers subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
Vote Required for Approval
A copy of the 1996 Non-Qualified Plan is annexed hereto as Exhibit "1". The
1996 Non-Qualified Plan must be approved by the Company's stockholders. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting in person or by proxy is required for
approval of this proposal. Abstentions are not counted in determining the
number of votes required to attain a majority of the outstanding shares in
connection with this proposal.
The board of directors unanimously recommends a vote FOR approval of the
adoption of the 1996 Non-Qualified Stock Option Plan.
PROPOSAL TO RATIFY APPOINTMENT
OF INDEPENDENT AUDITORS
The board of directors of the Company has appointed the firm of BDO Seidman,
LLP, Certified Public Accountants as the Company's independent auditors for
the fiscal year ending September 30, 1996. The board of directors will
propose ratification of the appointment of BDO Seidman, LLP. BDO Seidman,
LLP has no financial interest of any kind in the Company and has had no
connection with the Company at any time in the past except for the
professional relationship between auditor and client.
The affirmative vote of the holders of a majority of the Common Stock of the
Company represented at the Annual Meeting will be required for approval of
the auditors. If such approval is not obtained, selection of independent
auditors will be reconsidered by the board of directors.
Representatives of BDO Seidman, LLP are expected to be present at the
stockholders meeting with the opportunity to make a statement if they desire
to do so, and shall be available to respond to appropriate questions.
Effective August 10, 1995 the Company dismissed Arthur Andersen, LLP
("Andersen") as its independent public accountants. Andersen had served as
the Company's independent public accountants for the Company's fiscal year
<PAGE>
ended December 31, 1993 and for the nine months ended September 30, 1994.
During such periods the reports prepared by Andersen did not contain any
adverse opinions or disclaimer of opinions nor were they qualified or
modified as to uncertainties, audit scope or accounting principles except
that the report for the nine months ended September 30, 1994 was prepared
assuming the Company would continue as a going concern and it expressed doubt
about the Company's ability to continue as a going concern. That report was
prepared before the Company's consummation of its public offering.
The decision to change accountants was recommended and approved by the
Company's board of directors. There were no disagreements with Andersen on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures while Andersen served as the
Company's independent public accountants. The dismissal of Andersen was
because of fee considerations.
Effective August 10, 1995, BDO Seidman, LLP was named as the Company's
independent public accountants. BDO Seidman, LLP was not previously
consulted by the Company with respect to any matter preceding the date of
their appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN,
LLP, AS INDEPENDENT AUDITORS.
PROCEDURE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR NEXT ANNUAL MEETING
Proposals by stockholders for inclusion in the next annual meeting proxy
statement must be received prior to December 6, 1996. Proposals should be
addressed to the Secretary of Hauppauge Digital, Inc., 91 Cabot Court,
Hauppauge, New York 11788 and should be sent by certified mail, receipt
requested. All such proposals are subject to the applicable rules and
requirements of the Securities and Exchange Commission.
OTHER MATTERS
So far as the board of directors is aware, only the aforementioned matters
will be acted upon at the meeting. If any other matters properly come before
the meeting, it is intended that the accompanying proxy may be voted on such
other matters in accordance with the best judgment of the person or persons
voting said proxy.
By order of the board of directors.
Dated: January 22, 1996
KENNETH PLOTKIN
Secretary
<PAGE>
<PAGE>
APPENDIX AND EXHIBIT INDEX
Form of Proxy Card Appendix "A"
1996 Non-Qualified Stock Option Plan Exhibit "1"
<PAGE>
APPENDIX "A"
HAUPPAUGE DIGITAL, INC.
91 Cabot Court
Hauppauge, New York 11788
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
MARCH 5, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints KENNETH R. AUPPERLE and KENNETH PLOTKIN
and each or either of them (with power of substitution) and proxies for the
undersigned, to vote all shares of Common Stock of record on January 19, 1996
of HAUPPAUGE DIGITAL, INC. which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held on March
5, 1996 at 10:00 a.m. local time, or at any adjournment thereof, upon the
matters set forth in the Notice of and Proxy Statement for said Meeting,
copies of which have been received by the undersigned, and, in their
discretion, upon all other matters which may properly come before said
meeting. Without otherwise limiting the generality of the foregoing said
proxies are directed to vote as follows:
No. 1: ELECTION OF DIRECTORS
To serve for the term continuing through the next annual meeting and
until the election and qualification of their respective successors.
Kenneth R. Aupperle, Kenneth Plotkin, Laura Aupperle, Dorothy Plotkin,
Leonard Neuhaus
[ ] FOR all nominees listed above (except as withheld in the space
below.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
____________________________________________________________________
No. 2: PROPOSAL TO APPROVE THE ADOPTION OF THE 1996 NON-QUALIFIED STOCK
OPTION PLAN IN THE FORM ATTACHED TO THE PROXY STATEMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
No. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Proposal to ratify the appointment of BDO Seidman, LLP, Certified Public
Accountants, as the independent auditors to examine the financial
statements of the Company for the fiscal year ending September 30, 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO CONTRARY DIRECTION IS GIVEN ABOVE, AND THIS PROXY IS
PROPERLY SIGNED, THE SHARES WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE.
Your proxy is important to assure a quorum at the meeting whether or not you
plan to attend the meeting in person. You may revoke this proxy at any time,
and the giving of it will not affect your right to attend the meeting and
vote in person.
Dated _______________________________________
_____________________________________________
Signature
_____________________________________________
Signature if held jointly
_____________________________________________
Number of Shares as of January 19, 1996
This proxy must be signed exactly as name
appears. When shares are held by joint tenants,
both should sign. When signing as attorney or as
trustee, executor or guardian, please give full
title as such. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
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EXHIBIT "1"
HAUPPAUGE DIGITAL, INC.
NON-QUALIFIED STOCK OPTION PLAN
SECTION 1 - OBJECTIVE
The objective of the Hauppauge Digital, Inc. Non-Qualified Stock Option
Plan (the "Plan") is to attract and retain the best available executive
personnel and other key employees to be responsible for the management,
growth and success of the business, and to provide an incentive for such
employees to exert their best efforts on behalf of the Company and it
shareholders and to authorize the grant of Options to such other consultants
or other individuals or entities as may be deemed in the best interest of the
Company.
SECTION 2 - DEFINITIONS
2.1 General Definitions. The following words and phrases, when used
herein, shall have the following meanings:
(a) "Act" - The Securities Exchange Act of 1934, as amended.
(b) "Agreement" - The document which evidences the grant of any
Award under the Plan and which sets forth the terms,
conditions, and limitations relating to such Award.
(c) "Award" - The grant of any stock option.
(d) "Board" - The Board of Directors of Hauppauge Digital, Inc.
(e) "Code" - The Internal Revenue Code of 1986, as amended, and
including the regulations promulgated pursuant thereto.
(f) "Committee" - The Stock Option Committee which shall be the
Board or two or more members of the Board.
(g) "Common Stock" - The present shares of Common Stock of the
Company, and any shares into which such shares are converted,
changed or reclassified.
(h) "Company" - Hauppauge Digital, Inc., a Delaware corporation,
and its groups, divisions and subsidiaries.
(i) "Employee" - Any person employed by the Company as an
employee.
(j) "Fair Market Value" or "FMV" - The fair market value of Common
Stock on a particular day shall be the closing price of the
Common Stock on NASDAQ, or if not applicable, by the National
Quotations Bureau or any other national stock exchange on
which the Common Stock is traded, on such date.
(k) "Option" - The right to purchase Common Stock of the Company
at a stated price for a specified period of time. For
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purposes of the Plan, the option is a Non-Qualified Stock
Option.
(l) "Participant" - Any Employee or other consultant, individual
or entity designated by the Committee to participate in the
Plan.
(m) "Shares" - Shares of Common Stock.
2.2 - Other Definitions. In addition to the above definitions, certain
words and phrases used in the Plan and any Agreement may be defined elsewhere
in the Plan or in such Agreement.
SECTION 3 - COMMON STOCK
3.1 - Number of Shares. Subject to the provisions of Section 3.3, the
number of Shares which may be issued for Options granted under the Plan may
not exceed 250,000 Shares.
3.2 - Re-Usage. If an Option expires or is terminated, surrendered, or
canceled without having been fully exercised, or if any other grant results
in any Shares not being issued, the Shares covered by such Option shall again
be immediately available for Awards under the Plan.
3.3 - Adjustments. In the event of any change in the outstanding Common
Stock by reason of a stock split, stock dividend, combination,
reclassification or exchange of Shares, recapitalization, merger,
consolidation or other similar event, the number of Shares available for
Options, and the number of Shares subject to outstanding Options, and the
price thereof, and the Fair Market Value, as applicable, shall be
proportionately adjusted by the Committee in its sole discretion and any such
adjustment shall be binding and conclusive on all parties. Any fractional
Shares resulting from any such adjustment shall be disregarded.
SECTION 4 - ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those key employees, consultants or
other individuals or entities selected by the Committee to participate in the
Plan whose participation in the Plan the Committee or management of the
Company determines to be in the best interests of the Company.
SECTION 5 - ADMINISTRATION
5.1 - Committee. The Plan shall be administered by the Committee, which
shall consist of the Board of Directors or a committee of at least two or
more members of the Board of Directors.
5.2 - Authority. The Committee shall have the sole and complete
authority to:
(a) determine the individuals to whom awards are granted, the
amounts of the awards to be granted and the time of all such
grants;
(b) determine the terms, conditions and provisions of, and
restrictions relating to, each Award granted;
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(c) interpret and construe the Plan and all Agreements;
(d) prescribe, amend and rescind rules and regulations relating to
the Plan;
(e) determine the content and form of all Agreements;
(f) determine all questions relating to Awards under the Plan;
(g) maintain accounts, records and ledgers relating to Awards;
(h) maintain records concerning its decisions and proceedings;
(i) employ agents, attorneys, accountants or other persons for
such purposes as the Committee considers necessary or
desirable;
(j) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and to carry
out the objectives of the Plan.
5.3 - Determinations. All determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding and conclusive for all purposes and upon all persons.
SECTION 6 - STOCK OPTIONS
6.1 - Type of Option. It is intended that only non-qualified stock
options may be granted by the Committee under the Plan.
6.2 - Grant of Option. An Option may be granted to Participants at such
time or times as shall be determined by the Committee. Each Option shall be
evidenced by an Option Agreement that shall specify the exercise price, the
duration of the Option, the number of Shares to which the Option applies, and
such other terms and conditions not inconsistent with the Plan as the
Committee shall determine.
6.3 - Option Price. The per share option price shall be determined by
the Committee at the time the Option is granted.
6.4 - Exercise of Options. Options awarded under the Plan shall be
exercisable at such times and shall be subject to such restrictions and
conditions, including the performance of a minimum period of service after
the grant, as the Committee may impose, which need not be uniform for all
participants; provided, however, that no Option shall be exercisable for more
than 10 years after the date on which it is granted.
6.5 - Payment. The Committee shall determine the procedures governing
the exercise of Options, and shall require that the per share option price be
paid in full at the time of the exercise. The Committee may, in its
discretion, permit a Participant to make payment in cash, in Shares already
owned by the Participant, valued at the Fair Market Value thereof, as partial
or full payment of the exercise price or through a "Cashless Exercise".
If a Participant elects to utilize a Cashless Exercise, he shall be
entitled to a credit equal to the amount of that equity by which the current
Fair Market Value exceeds the option price on that number of options
surrendered and to utilize that credit to exercise additional options held by
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him that such equity could purchase. There shall be canceled that number of
options utilized for the credit and for the options exercised for such
credit. For example, if the Participant has options to acquire 10,000 shares
which are exercisable, the Fair Market Value is $4.15 per share, the exercise
price is $3.15 per share, and the participant elects to utilize for a credit
5,000 options ($5,000), then upon a Cashless Exercise in connection therewith
he shall be entitled to acquire 1,587 shares of Common Stock in exchange for
the options for 5,000 shares for which a credit has been received and option
for 1,587 shares have been exercised. The Participant will still have
exercisable options to acquire 3,413 shares of Common Stock.
As soon as practical after full payment of the exercise price, the
Company shall deliver to the Participant a certificate or certificates
representing the acquired shares.
6.6 - Rights of a Shareholder. Until the exercise of an Option and the
issuance of the Shares in respect thereof, a Participant shall have no rights
as a Shareholder with respect to the Shares covered by such Option.
SECTION 7 - AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board of Directors at any time may terminate or suspend the Plan,
and from time to time may amend or modify the Plan or modify any option
granted under the Plan. No amendment, modification, or termination of the
Plan shall in any manner adversely affect any Award theretofore granted under
the Plan without the consent of the Participant.
SECTION 8 - MISCELLANEOUS PROVISIONS
8.1 - No Guarantee of Employment by Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company to
terminate any Participant's relationship with the Company at any time, nor
confer upon any Participant any right to continue in the employment of the
Company. No employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.
8.2 - Tax Withholding. The Company shall have the authority to
withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state and local withholding tax requirements
on any Award under the Plan, and the Company may defer payment of cash or
issuance of Shares until such requirements are satisfied. The Committee may,
in its discretion, permit a Participant to elect, subject to such conditions
as the Committee shall require, to have Shares otherwise issuable under the
Plan withheld by the Company and having a Fair Market Value sufficient to
satisfy all or part of the Participant's estimated total federal, state and
local tax obligation associated with the transaction.
8.3 - Governing Law. The Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the Code or
Act, shall be governed by the laws of the State of New York and construed in
accordance therewith.
8.4 - Effective Date. The Plan shall be submitted to the Shareholders
of the Company for approval at the Annual Meeting of Shareholders of the
Company scheduled to be held on March 5, 1996 and shall be effective
immediately upon such approval by the Shareholders of the Company. The Plan
shall terminate ten (10) years after the date of Shareholder approval.
