(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Hauppauge Digital, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)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 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
<PAGE>
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] 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
March 25, 1999
To the Stockholders of Hauppauge Digital, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Hauppauge Digital, Inc., a Delaware corporation (the "Company"),
will be held at the Company's executive offices at 91 Cabot Court, Hauppauge,
New York 11788 on March 25, 1999 at 10:00 a.m., New York time, for the following
purposes:
(1) To elect a Board of four (4) directors.
(2) To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending September 30,
1999.
(3) To transact such other business as may properly come before
the Meeting.
Only stockholders of record at the close of business on February 25,
1999 are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
By Order of the Hauppauge Digital, Inc.
Board of Directors
Kenneth Plotkin
Secretary
Hauppauge, New York
March 3, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF HAUPPAUGE DIGITAL, INC., AND RETURN IT IN THE PRE- ADDRESSED
ENVELOPE PROVIDED FOR THAT PURPOSE. A STOCKHOLDER MAY REVOKE HIS PROXY AT ANY
TIME BEFORE THE MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A
SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
HAUPPAUGE DIGITAL, INC.
91 Cabot Court
Hauppauge, New York 11788
PROXY STATEMENT
SOLICITING, VOTING AND REVOCABILITY OF PROXY
This Proxy Statement is being mailed to all stockholders of record of
Hauppauge Digital, Inc. (the "Company") at the close of business on February 25,
1999 in connection with the solicitation by the Board of Directors of Proxies to
be voted at the Annual Meeting of Stockholders (the "Meeting") to be held at the
Company's executive offices at 91 Cabot Court, New York 11788 on March 25, 1999
at 10:00 a.m., local time, or any adjournment thereof. The Proxy and this Proxy
Statement were mailed to stockholders on or about March 3, 1999.
All shares represented by Proxies duly executed and received will be
voted on the matters presented at the Meeting in accordance with the
instructions specified in such Proxies. Proxies so received without specified
instructions will be voted (1) FOR the nominees named in the Proxy to the
Company's Board of Directors, and (2) FOR the ratification of the appointment of
BDO Seidman, LLP as the Company's independent auditors for the fiscal year
ending September 30, 1999. The Board does not know of any other matters that may
be brought before the Meeting nor does it foresee or have reason to believe that
Proxy holders will have to vote for substitute or alternate nominees to the
Board. In the event that any other matter should come before the Meeting or any
nominee is not available for election, the persons named in the enclosed Proxy
will have discretionary authority to vote all Proxies not marked to the contrary
with respect to such matters in accordance with their best judgment.
The total number of shares of Common Stock of the Company ("Common
Shares") outstanding and entitled to vote as of February 25, 1999 was 4,308,502.
The Common Shares are the only class of securities of the Company entitled to
vote on matters presented to the stockholders of the Company, each share being
entitled to one noncumulative vote. A majority of the Common Shares outstanding
and entitled to vote as of February 25, 1999, or 2,154,252 Common Shares, must
be present at the Meeting in person or by proxy in order to constitute a quorum
for the transaction of business. Only stockholders of record as of the close of
business on February 25, 1999 will be entitled to vote. With regard to the
election of directors, votes may be cast in favor or withheld. Each class of
directors shall be elected by a plurality of the votes cast in favor. Votes
withheld in connection with the election of one or more of the nominees for
director will not be counted as votes cast for such individuals. Stockholders
may expressly abstain from voting on Proposal 2 by so indicating on the Proxy.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted as present in the tabulation of votes on Proposal 2. Broker non-votes
are not counted for the purpose of determining whether Proposal 2 has been
approved. Since Proposal 2 requires the affirmative approval of a majority of
the Common Shares present in person or represented by proxy
<PAGE>
at the Meeting (assuming a quorum is present at the Meeting), abstentions will
have the effect of a negative vote while broker non-votes will have no effect.
Any person giving a Proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before its exercise. The Proxy may be
revoked by filing with the Company's written notice of revocation or a fully
executed Proxy bearing a later date. The Proxy may also be revoked by
affirmatively electing to vote in person while in attendance at the Meeting.
However, a stockholder who attends the Meeting need not revoke a Proxy given and
vote in person unless the stockholder wishes to do so. Written revocations or
amended Proxies should be sent to the Company at 91 Cabot Court, Hauppauge, New
York 11788, Attention: Corporate Secretary.
The Proxy is being solicited by the Company's Board of Directors. The
Company will bear the cost of the solicitation of Proxies, including the charges
and expenses of brokerage firms and other custodians, nominees and fiduciaries
for forwarding proxy materials to beneficial owners of the Company's shares.
Solicitations will be made primarily by mail, but certain directors, officers or
employees of the Company may solicit Proxies in person or by telephone,
telecopier or telegram without special compensation.
A list of stockholders entitled to vote at the Meeting will be
available for examination by any stockholder for any purpose germane to the
Meeting, during ordinary business hours, for ten days prior to the Meeting, at
the offices of the Company, 91 Cabot, Hauppauge, New York 11788, and also during
the whole time of the Meeting for inspection by any stockholder who is present.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information for the fiscal years
ended September 30, 1998, 1997 and 1996 concerning the compensation of Kenneth
Plotkin, Chairman of the Board and Chief Executive Officer of the Company,
Kenneth R. Aupperle, President and Chief Operating Officer of the Company and
John Casey, Vice President - Technology of the Company. No other executive
officer of the Company had a combined salary and bonus in excess of $100,000 for
the fiscal year ended September 30, 1998.
2
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Annual Common Stock Underlying
Name and Principal Position Year Salary Compensation Options Granted
<S> <C> <C> <C> <C>
Kenneth Plotkin 1998 $120,412 $ 5,500(1) 75,000
Chairman of the Board and 1997 $ 94,016 $ 4,800(1)
Chief Executive Officer 1996 $ 62,746(2) $ 4,800(1) 15,000
Kenneth R. Aupperle 1998 $120,412 $ 5,500(1) 75,000
President and Chief 1997 $ 4,016 $ 4,800(1)
Operations Officer 1996 $ 62,746(2) $ 4,800(1) 15,000
John Casey 1998 $110,888 15,500
Vice President of 1997 $103,574 4,500
Technology 1996 $ 96,346 10,000
</TABLE>
- -------------------
(1) Represents non-cash compensation in the form of the use of a car and related
expenses.
(2) Does not include compensation deferred as of September 30, 1996 in the
amount of $12,331.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning
individual grants of stock options during the fiscal year ended September 30,
1998:
<TABLE>
<CAPTION>
Number of Shares of Percentage of Total
Common Stock Underlying Options Granted to
Name Options Granted Employees in Fiscal Year Exercise Price Expiration Date
<S> <C> <C> <C> <C>
Kenneth Plotkin 45,000 (ISO) 17 5.0875 January 20, 2008
30,000 (NQ) 12 4.6250 January 20, 2008
Kenneth R. Aupperle 45,000 (ISO) 17 5.0875 January 20, 2008
30,000 (NQ) 12 4.6250 January 20, 2008
John Casey 15,500 6 4.50 February 1, 2008
</TABLE>
3
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth certain information concerning the value
of options unexercised as of September 30, 1998:
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Underlying Value of Unexercised In-
Number of Shares of Unexercised Options at the-Money Options at
Common Stock September 30, 1998 September 30, 1998
Name Acquired on Exercise Realized Value Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Kenneth Plotkin -0- -0- 135,000/120,000 $565,417.50/$516,435
Kenneth R. Aupperle -0- -0- 135,000/120,000 $565,417.50/$516,435
John Casey -0- -0- 6,000/24,000 $ 27,248/$97,537
</TABLE>
Compensation of Directors
Directors of the Company are not compensated solely for being on the Board
of Directors. However, during the fiscal year, 5,000 non-qualified options were
issued to each of Messrs. Neuhaus (who served as a director until July 2, 1998)
and Herman. See "1996 Non-Qualified Stock Option Plan". It is the intention of
the Company to issue non-qualified options in the future to non-employee
directors.
Employment Contracts; Termination of Employment and Change-in-Control
Arrangements
On January 10, 1995, Kenneth R. Aupperle and Kenneth Plotkin each entered
into a three year employment agreement (the "1995 Employment Agreements") with
the Company to serve as President, and Chief Operations Officer, Chief Executive
Officer, Vice-President in charge of marketing and Secretary, respectively. The
1995 Employment Agreements provided 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 of the 1995 Employment Agreements provided 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. The
1995 Employment Agreements expired on December 31, 1997.
As of January 10, 1998, Kenneth R. Aupperle and Kenneth Plotkin each
entered into new employment agreements (the "1998 Employment Agreements") 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 1998 Employment Agreements each provide for at three year term
which term is automatically renewable each year unless otherwise terminated by
the Board of Directors or employee. The 1998 Employment Agreements provide for
an annual base salary of $125,000 during the first year, $150,000 during the
second year, and $180,000 during the third year. For each Annual Period (as
defined in the 1998 Employment Agreements)
4
<PAGE>
thereafter, the 1998 Employment Agreements provide that compensation shall be as
mutually determined, but not less than that for the preceding Annual period. In
addition, the 1998 Employment Agreements provide for a bonus to be paid as
follows: an amount equal to 2% of the Company's earnings, excluding earnings
that are not from operations, before reduction for interest and income taxes
("EBIT"), for each fiscal year starting with the year ended September 30, 1998,
provided that the Company's EBIT for the applicable fiscal year exceeds 120% of
the prior fiscal year's EBIT and if not, then 1% of the Company's EBIT. The
determination of EBIT shall be made in accordance with the Company's audited
filings with the Securities and Exchange Commission on its Form 10-KSB or Form
10-K. The 1998 Employment Agreements further provide for disability benefits,
term life insurance in the amount of $500,000 each for the benefit of the
executives' families and the Company, a car allowance of $500 per month,
reasonable reimbursement for automobile expense, and medical insurance as is
standard for executives of the Company. In the event of a Change in Control in
the Company (as defined in the 1998 Employment Agreements), a one-time bonus
shall be paid equal to three times the about of the executive's average annual
compensation (including salary, bonus and benefits) received by him for the
thirty-six month period preceding the date of the Change of Control.
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 of 1986, as
amended (the "Code"). 200,000 shares of Common Stock of the Company 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. On August 6, 1997,
the ISO was registered with the Securities and Exchange Commission under Form
S-8. Pursuant to the 1998 Employment Agreements, on January 21, 1998, options to
acquire a total of 32,500 shares of Common Stock of the Company were granted to
Kenneth R. Aupperle and Kenneth Plotkin, in equal shares, exercisable in
increments of 33 1/3% per year at $5.0875 per share, for a period of five years
form the date the options first become exercisable. Options to acquire a total
of 18,500 shares have been granted to Gerald Tucciarone, the Company's Chief
Financial Officer, and 14,500 to John Casey, the Company's Vice President of
Technology. As of February 25, 1999, options to purchase an aggregate of 196,800
shares of Common Stock of the Company have been granted under the 1994 Incentive
Stock Option Plan.
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") which was
approved by the Company's stockholders on March 15, 1996. The 1996 Non-Qualified
Plan authorizes the grant of 250,000 shares of Common Stock of the Company
subject to adjustment as provided therein. 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 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
5
<PAGE>
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 of the Company 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.
Pursuant to the 1998 Employment Agreements, on January 21, 1998, options to
acquire 30,000 shares of Common Stock of the Company were granted to each
Kenneth R. Aupperle and Kenneth Plotkin, exercisable for a period of ten years
at $4.625 per share. On March 15, 1996, options to acquire 15,000 shares each
were granted to Kenneth R. Aupperle and Kenneth Plotkin, exercisable for a
period of ten years at $3.00 per share. On March 5, 1997, options to acquire
5,000 shares of Common Stock of the Company each were granted to Bernard Herman
and Leonard Neuhaus, exercisable for a period of five years at $2.69 per share.
On February 2, 1998, options to acquire 5,000 shares of Common Stock of the
Company each were granted to Bernard Herman and Leonard Neuhaus (a Director
until July 2, 1998), exercisable for a period of five years at $4.50 per share.
As of February 25, 1999, options to purchase an aggregate of 110,000 shares of
Common Stock of the Company have been granted under the 1996 Non-Qualified Stock
Option Plan.
1998 Incentive Stock Option Plan
On December 17, 1997 the Company's Board of Directors authorized the
adoption of the 1998 Incentive Stock Option Plan (the "1998 Incentive Plan")
which was approved by the Company's stockholders on March 12, 1999, under
Section 422 of the Code. The 1998 Incentive Plan authorizes the grant of 350,000
shares of Common Stock of the Company, subject to adjustment as provided in the
plan. Pursuant to the 1998 Employment Agreements, on January 21, 1998, options
to acquire a total of 57,500 shares of Common Stock of the Company were granted
to Kenneth R. Aupperle and Kenneth Plotkin, in equal shares, exercisable in
increments of 33 1/3% per year at $5.0875 per share, for a period of five years
from the date the options first become exercisable. Eligibility to participate
in the 1998 Incentive Plan is limited to key employees of the Company and its
subsidiaries. The 1998 Incentive Plan terminates December 16, 2007. The term of
each option may not exceed ten years. Options will not be transferable except
upon death and, in such event, transferability will be effected by will or by
the laws of descent and distribution. Options under the 1998 Incentive Plan may
not be granted at less than 100% of fair market value at the time of the grant.
Options granted to employees who own more than 10% of the Company's outstanding
Common Stock will be granted at not less than 110% of fair market value for a
term of five years. The aggregate market value of stock for which Incentive
Stock Options are exercisable during any calendar year by an individual is
limited to $100,000, but the value may exceed $100,000 for which options may be
granted to an individual. Payment of the exercise price for options under the
1998 Incentive Plan are to be made in cash or by the exchange of Common Stock
having equivalent value. For purposes of the 1998 Incentive Plan, fair market
value is the last price for the Company's Common Stock as quoted by NASDAQ. No
disposition of Common Stock received upon exercise of options shall be made
within two (2) years from the date of grant of the Option nor within one (1)
year after the exercise. In the event of any future recapitalization, split-up
or consolidation of shares, the number of shares and exercise price shall be
proportionately adjusted. As of February 25, 1999, options to purchase an
aggregate of 148,150 shares of Common Stock of the Company have been granted
under the 1998 Incentive Stock Option Plan.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of February 25, 1999
regarding the beneficial ownership of the Company's Common Stock (i) by each
person who the Company believes to be the beneficial owner of more than 5% of
its outstanding shares of Common Stock, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
Name of Management Person
and Name and Address
of Beneficial Owner Number Percent
Kenneth Plotkin(1)(2) 443,150(3) 9.9%
91 Cabot Court
Hauppauge, NY 11788
Kenneth R. Aupperle(1)(2) 437,610(3) 9.8%
91 Cabot Court
Hauppauge, NY 11788
Laura Aupperle(1)(2) 302,550(2) 7.0%
23 Sequoia Drive
Hauppauge, NY 11788
Dorothy Plotkin(1)(2) 305,950(2) 7.1%
21 Pine Hill Drive
Hauppauge, NY 11788
LCO Investments Limited 215,000 5.0%
c/o Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
John Casey 53,100(4) 1.2%
Bernard Herman 13,000(5) *
7
<PAGE>
Steven J. Kuperschmid -0- *
Directors and executive officers
as a group (6 persons) 962,860(6) 20.8%
- ---------------------------------
* Less than one (1%) percent.
(1) Laura Aupperle, wife of Kenneth R. Aupperle, beneficially owns 302,550
shares, or 7.0% of the outstanding shares of Common Stock of the Company.
Dorothy Plotkin, wife of Kenneth Plotkin, beneficially owns 305,950 shares
or 7.1% of the outstanding shares of Common Stock of the Company. Ownership
of shares of Common Stock by each individual does not include ownership by
that person's spouse which is disclaimed by the named individual.
(2) One presently exercisable warrant has been issued for 60,000 shares to
Laddok Realty Co. ("Laddok"), of which Kenneth R. Aupperle and Kenneth
Plotkin, and their wives, Laura Aupperle and Dorothy Plotkin, are partners.
Each individual expressly disclaims any percentage interest in the warrant
other than that which represents such partner's percentage interest in the
partnership, which is equal to 15,000 shares.
(3) Includes 60,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options granted on January 10,
1995 and exercisable until January 9, 2005, which options were part of an
overall grant of a non-qualified stock option to purchase 150,000 shares of
Common Stock at $3.15 per share. Also includes 45,000 shares of Common Stock
issuable upon the exercise of currently exercisable non-qualified options
and 45,000 shares of Common Stock issuable upon the exercise of currently
exercisable incentive stock options. Does not include 90,000 shares of
Common Stock issuable upon the exercise of currently unexercisable
non-qualified stock options. Also does not include 15,000 shares of Common
Stock issuable upon the exercise of currently unexercisable incentive stock
options.
(4) Includes 6,000 shares of Common Stock issuable upon the exercise of
currently exercisable incentive stock options. Does not include 20,000
shares of Common Stock issuable upon the exercise of currently unexercisable
incentive stock options.
(5) Includes 10,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options.
(6) Includes an aggregate of 328,000 shares of Common Stock issuable upon
the exercise of currently exercisable incentive and non-qualified stock
options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
8
<PAGE>
The Company occupies a 25,000 square foot facility at 91 Cabot court,
Hauppauge, New York which it uses as its executive offices and for the testing,
storage, and shipping of its products. The Company considers the premises to be
suitable for all its needs. The building is owned by Laddok, a partnership
consisting of Messrs. Aupperle and Plotkin and their wives and is leased to the
Company under a lease agreement expiring on January 31, 2006 with an option of
the Company to extend the lease for an additional three years. Rent is currently
at the annual rate of $321,958 and will increase to $338,058 per year on
February 1, 1998. The rent is payable in equal monthly installments and
increases at a rate of 5% per year on February 1, of each year thereafter
including during the option period. The premises are subject to two mortgages
which have been guaranteed by the Company upon which the outstanding principal
amount due as of September 30, 1998 was $1,038,782. The Company pays the taxes
and operating costs of maintaining the premises.
On December 17, 1996 the Board of Directors approved the issuance of
warrants to Laddok in consideration of Laddok's agreement to cancel the last
three years of the company's lease and to grant an option to the Company to
extend the lease for three years. The Stock Option Committee authorized the
grant of a warrant to Laddok to acquire 60,000 shares at an exercise price of $3
13/16, which is exercisable for a term of ten years.
For a discussion regarding the employment agreements of, and stock options
granted to, Messrs. Plotkin and Aupperle, see "Executive Compensation", above.
PROPOSAL 1: ELECTION OF DIRECTORS
Four Directors are to be elected at the Meeting to serve until the next
annual meeting of stockholders and until their respective successors have been
elected and have qualified, or until their earlier resignation or removal. If
for some unforeseen reason one or more of the nominees is not available as a
candidate for Director, the Proxies may be voted for such other candidate or
candidates as may be nominated by the Board.
Nominees for Director
The following tables set forth the positions and offices presently held with
the Company by each nominee, his age as of February 25, 1999 and the year in
which he became a director. Proxies not marked to the contrary will be voted in
favor of each such nominee's election. The Board recommends a vote FOR all
nominees.
<TABLE>
<CAPTION>
Name
Age(1) Officer and Positions Held
<S> <C> <C>
Kenneth R. Aupperle 41 President, Chief Operations Officer and
Director
Kenneth Plotkin 47 Chairman of the Board of Directors, Chief
Executive Officer, Vice-president, Secretary
and Director
Bernard Herman 71 Director
Steven J. Kuperschmid 38 Director
</TABLE>
(1) Age as of February 25, 1999.
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 holds a BS in Electrical Engineering and an MS in Computer Science from
Polytechnic University, along with additional work toward a Ph.D.
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.
Bernard Herman, from 1979 to 1993, was Chief Executive Officer of Okidata Corp.
of Mount Laurel, New Jersey, a distributor of computer peripheral products.
Since then he has served as a consultant with reference to computer products.
Steven J. Kuperschmid has been practicing law since 1986 and has been a partner
with Certilman Balin Adler & Hyman, LLP, counsel to the Company, since January
1, 1994. Mr. Kuperschmid received his BA from New York University and JD from
Fordham University School of Law.
Board Committees
The Audit Committee is responsible for reviewing and making recommendations
regarding the Company's employment of independent auditors, the annual audit of
the Company's financial statements and the Company's internal accounting
controls, practices and policies. The compensation committee are to determine
the general compensation policies of the Company, establish compensation plans,
and determine senior management compensation. The stock option committee is to
administer the Company's stock option plans. Bernard Herman and Steven J.
Kuperschmid are each members of the audit, compensation, and stock option
committees. Kenneth R. Aupperle also serves on the audit committee. Kenneth
Plotkin also serves as a member of the compensation committee. The stock option
and audit committees met once and the compensation committee met once during the
fiscal year ending September 30, 1998.
Meetings
The Board held 9 meetings during the year ended September 30, 1998. All of
the then incumbent directors of the Company attended each meeting. The Board
also acted on one occasion during 1998 by unanimous written consent in lieu of a
meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended ("Section
16"), requires that reports of beneficial ownership of capital stock and changes
in such ownership be filed with the Securities and Exchange
9
<PAGE>
Commission (the "SEC") by Section 16 "reporting persons," including directors,
certain officers, holders of more than 10% of the outstanding Common Stock and
certain trusts of which reporting persons are trustees. The Company is required
to disclose in this Annual Report on Form 10-KSB each reporting person whom it
knows to have failed to file any required reports under Section 16 on a timely
basis during the fiscal year ended September 30, 1998. To the Company's
knowledge, based solely on a review of copies of Forms 3, 4 and 5 furnished to
it and written representations that no other reports were required, during the
fiscal year ended September 30, 1998, the Company's officers, Directors and 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them except: Mr. Plotkin failed to file three reports relative to three
transactions. Mr. Aupperle failed to file one report relative to one
transaction. Mr. Tucciarone failed to file two reports relative to three
transactions. Mr. Herman failed to file one report relative to one transaction.
Mr. Kuperschmid failed to file one report relative to one transaction.
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, 1999. The board of Directors will propose
ratification of the appointment of BDO Seidman, LLP.
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.
BDO Seidman, LLP was named as the Company's independent public accountants
effective August 10, 1995. BDO Seidman, LLP was not previously consulted by the
Company with respect to any matter preceding the date of their appointment.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the SEC,
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), must be received by the Secretary of the Company at the principal
executive offices of the Company by November 25, 1998 for inclusion in the
Company's Proxy Statement and form of Proxy relating to such meeting. The
Company, however, intends to hold next year's annual meeting earlier in the year
than this year's meeting. Accordingly, the Company suggests that stockholder
proposals intended to be presented at next year's annual meeting be submitted
well in advance of March 1, 2000, the earliest date upon which the Company
anticipates the proxy statement and form of proxy relating to such meeting will
be released to stockholders.
OTHER BUSINESS
While the accompanying Notice of Annual Meeting of Stockholders provides
for the transaction of such
10
<PAGE>
other business as may properly come before the Meeting, the Company has no
knowledge of any matters to be presented at the Meeting other than those listed
as Proposals 1 and 2 in the notice. However, the enclosed Proxy gives
discretionary authority in the event that any other matters should be presented.
By Order of the Hauppauge Digital, Inc.
Board of Directors
Kenneth Plotkin
Chairman of the Board and Chief Executive
Officer
Hauppauge, New York
March 3, 1999
11
<PAGE>
HAUPPAUGE DIGITAL, INC.
91 Cabot Court
Hauppauge, New York 11788
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Kenneth R. Aupperle and Kenneth Plotkin
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them, and each of them, to represent and vote, as designated below, all the
shares of Common Stock of Hauppauge Digital, Inc. (the "Company") held of record
by the undersigned on February 25, 1999 at the Annual Meeting of Stockholders to
be held on March 25, 1999 or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted for Proposals 1 and 2 and in favor of any proposal to
adjourn the meeting in order to allow the Company additional time to obtain
sufficient Proxies with regard thereto.
(Continued and to be signed on reverse side)
<PAGE>
[Reverse Side] Please date, sign and mail your proxy card back as soon as
possible! Annual Meeting of Stockholders
Hauppauge Digital, Inc.
March 25, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A |X| Please mark your votes as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 and 2
1. Election of Directors
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary as instructed below). listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
such nominee's name from the list below.)
KENNETH R. AUPPERLE KENNETH PLOTKIN
BERNARD HERMAN STEVEN J. KUPERSCHMID
2. Proposal to ratify the appointment of BDO Seidman, LLP as the
Company's independent auditors for the fiscal year ending
September 30, 1999.
FOR AGAINST ABSTAIN
<PAGE>
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
(continued and signed on next page)
[Reverse side continued]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
Signature: ________ Signature, if held jointly: __________ Dated: ________, 1999
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership or limited liability company, please sign in full partnership or
limited liability company name by an authorized person.
<PAGE>
