EXHIBIT 4.1
2000 Performance and Equity Incentive Plan
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HAUPPAUGE DIGITAL, INC.
2000 PERFORMANCE AND EQUITY INCENTIVE PLAN
ARTICLE 1
NAME AND PURPOSE
1.1 Name The name of this Plan is the "Hauppauge Digital, Inc. 2000 Performance
and Equity Incentive Plan".
1.2 Purpose The purpose of the Plan is to enhance the profitability and value
of the Company for the benefit of its shareholders by providing equity
ownership opportunities and performance based incentives to attract and
retain the services of key employees, directors and non-employee
consultants of the Company and its Subsidiaries and to motivate such
individuals to put forth maximum efforts on behalf of the Company.
ARTICLE II
DEFINITION OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions The following words and phrases when used in the Plan,
unless otherwise specifically defined or unless the context clearly
otherwise requires, shall have the following respective meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 10.2 and 10.3, respectively.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Commission" means the Securities and Exchange Commission or any
successor agency.
(e) "Committee" means the Committee referred to in Section 4.1, or the
Board.
(f) "Company" means Hauppauge Digital, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(g) "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
(h) "Early Retirement" means retirement, with the consent,
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for purposes of the Plan, of the Committee or such officer of the
Company as may be designated from time to time by the Committee, from
active employment with the Company or a Subsidiary prior to Normal
Retirement.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(j) "Fair Market Value" means the closing price of a share of Stock, as of
any given date, on any Exchange or in the over-the-counter market on
such date (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred), or if no such
reported sales prices are available, the fair market value of the
Stock as established by a good faith determination of the Committee.
(k) "Holder" means an Optionee or a Transferee, as defined in this Section
2.1 (p) and (y), respectively and shall include any person to whom a
Stock Option has been transferred by will or the laws of descent and
distribution.
(l) "Incentive Stock Option" means any Stock option intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the
Code.
(m) "Long Term Performance Award" or "Long Term Award" means an award
under Article IX.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment with the
Company or a Subsidiary at or after the retirement age determined by
the Board.
(p) "Optionee" means a person who is granted a Stock Option under Article
VI.
(q) "Plan" means the Hauppauge Digital, Inc. 2000 Performance and Equity
Incentive Plan, as set forth herein and as hereinafter amended from
time to time.
(r) "Restricted Stock" means an award under Article VIII.
(s) "Retirement" means Normal or Early Retirement.
(t) "Rule 16b-3" means Rule 16b-3 as promulgated by the Commission under
Section 16(b) of the Exchange Act as amended from time to time.
(u) "Stock" means the Common Stock, $.01 par value, of the Company.
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(v) "Stock Appreciation Right" means a right granted under Article VII.
(w) "Stock Option" or "Option" means an option granted under Article VI.
(x) "Subsidiary" means any business entity in which the Company, directly
or indirectly, owns 50 percent or more of the total combined voting
power of all classes of stock or other equity interest.
(y) "Transferee" means a member of an Optionee's Immediate Family, a
partnership or a trust to whom or which any Option is transferred as
provided in Section 6.5(c).
2.2 Other Definitions In addition to the above definitions, certain words and
phrases used in the Plan and any agreement may be defined in other portions
of the Plan or in such agreement.
2.3 Conflicts in Plan In the case of any conflict in the terms of the Plan, or
between the Plan and an agreement, relating to a benefit, the provisions in
the Article of the Plan which specifically grants such benefit shall
control.
ARTICLE III
STOCK SUBJECT TO PLAN
3.1 Number of Shares The number of shares of Stock reserved for distribution
pursuant to Stock Options or other awards under the Plan shall be equal to
500,000 shares. Such shares may consist, in whole or in part, of authorized
and unissued shares or issued shares heretofore or hereafter acquired and
held as treasury shares.
3.2 Reusage If an outstanding Stock Option or Stock Appreciation Right shall
expire or terminate without having been exercised in full, or if any
Restricted Stock award or Long Term Performance Award is not earned or is
forfeited in whole or in part, the shares subject to the unexercised or
forfeited portion of such award shall again be available for distribution
in connection with awards under the Plan. In the event that a Stock Option
is exercised by tendering shares to the Company as full or partial payment
of the option exercise price, only the number of shares issued net of the
shares tendered shall be deemed delivered under the Plan. Further, shares
tendered or withheld for the payment of taxes in connection with any award
shall again be available for distribution in connection with awards under
the Plan.
3.3 Adjustments In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split
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(including reverse stock splits), or other change in corporate structure
affecting the Stock such substitution or adjustments shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Stock Options, in
the determination of the amount payable upon exercise of outstanding Stock
Appreciation Rights and in the number of shares subject to other
outstanding awards granted under the Plan as may be determined by the
Committee, in its sole discretion, to be equitable to prevent substantial
dilution or enlargement of the rights granted to participants hereunder,
provided, however, that the number of shares subject to any award will
always be a whole number. The Committee shall give notice to each
participant of any adjustment made pursuant to this paragraph, and upon
such notice, such adjustment shall be effective and binding for all
purposes of the Plan.
3.4 Settlement of Awards Shares issued under the Plan as the result of the
settlement or assumption of, or substitution of awards under the Plan for,
any awards or obligations to grant future awards of any entity acquired by
or merging with the Company shall not reduce the number of shares available
for delivery under the Plan.
3.5 Maximum Number of Shares for Incentive Stock Options and Awards The maximum
number of shares available for delivery under the Plan through Incentive
Stock Options shall be 500,000 shares.
ARTICLE IV
ADMINISTRATION
4.1 Committee The Plan shall be administered by the Committee composed of two
or more members who are who are non-employee directors as defined under
Rule 16b-3 or the Board. With respect to grants to non-employee directors,
the grants shall be subject to Board approval.
4.2 Authorization of Committee Except as limited by the express provisions of
the Plan, the Committee shall have the sole and complete authority:
(a) to select the employees, employee and non-employee directors, and
non-employee consultants to whom Stock Options, Stock, Appreciation
Rights, Restricted Stock and Long Term Performance Awards may from
time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Long Term Performance Awards, or any combination thereof are to
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be granted, hereunder, provided that Incentive Stock Options may only
be granted to employees.
(c) to determine the number of shares to be covered by each award granted
hereunder;
(d) to determine the terms and conditions of any award granted hereunder
(including, but not limited to, the share price, any restriction or
limitation, any vesting acceleration or any forfeiture waiver
regarding any Stock Option or other award and the shares of Stock
relating thereto), based on such factors as the Committee shall
determine;
(e) to adjust the performance goal and measurements applicable to
performance-based awards pursuant to the terms of the Plan; and
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an award shall be deferred;
4.3 Administrative Rules The Committee shall have the authority to adopt,
alter, and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable, to
interpret the terms and provisions of the Plan and any award issued under
the Plan (and any agreement relating thereto), and otherwise to supervise
the administration of the Plan. The Committee may act only by a majority of
its members then in office, except that the members thereof may authorize
any one or more of their number or any officer of the Company to execute
and deliver documents on behalf of the Committee. Any determination made by
the Committee pursuant to the provisions of the Plan with respect to any
award shall be made in its sole discretion at the time of the grant of the
award or, unless in contravention of any express term of the Plan, at any
time thereafter. Whenever the Committee has the power, or right under this
Plan to adjust, alter, amend, award, consent, deem advisable, deem
appropriate, deem desirable, deem necessary, determined, determine
conditions, determine criteria, determine factors, determine terms, elect,
exercise authority, exercise discretion, grant, interpret, make a decision,
provide, set, specify, supervise, use criteria, use factors or any similar
power or right, the Committee shall have the sole, absolute and
uncontrolled discretion in doing so. The Committee's determinations under
the Plan (including, without limitation, of the persons to receive grants
or awards and the terms thereof) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, grants
or awards under the Plan, whether or not such persons are similarly
situated.
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ARTICLE V
ELIGIBILITY
5.1 Eligibility All employees, employee and non-employee directors, and
non-employee consultants to the Company and its Subsidiaries who in the
opinion of the Committee are responsible for, or contribute to, the
management, growth, and profitability of the business of the Company or its
Subsidiaries are eligible to be granted awards under the Plan, as
hereinafter provided.
ARTICLE VI
STOCK OPTIONS
6.1 Grants Stock Options may be granted alone or in addition to other awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan shall
be in such form as the Committee may from time to time approve. The
Committee shall have the authority to grant any Optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however,
that the Committee shall not have the authority to grant Incentive Stock
Options to any non-employee consultant or non-employee director. To the
extent that any Stock Option does not qualify as an Incentive Stock Option,
it shall constitute a separate Non-Qualified Stock Option.
6.2 Option Agreements Stock Options shall be evidenced by option agreements,
the terms and provisions of which may differ. An option agreement shall
indicate on its face whether it is an agreement for Incentive Stock Options
or Non-Qualified Stock Options. The grant of a Stock Option shall occur on
the date the Committee by resolution selects an employee as a participant
in any grant of Stock Options, determines the number of Stock Options to be
granted to such employee, and specifies the terms and provisions of the
option agreement; provided, however, that the Committee may designate in
such resolution a later date as the date of grant of any or all of the
Stock Options covered thereby. The Company shall notify a participant of
any grant of Stock Options, and a written option agreement or agreement
shall be duly executed between the Company and the participant.
6.3 No Disqualifications Under Section 422 of the Code Anything in the Plan to
the contrary notwithstanding, no term of the
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Plan relating to Incentive Stock Options shall be interpreted, amended, or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Optionee affected, to disqualify any Incentive
Stock Option under such Section 422.
6.4 Terms and Conditions of Option Grants Options granted under the Plan shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under an
Incentive Stock Option shall be equal to the Fair Market Value of the
Stock on the date of grant or such higher price as shall be determined
by the Committee at grant. The option price per share of Stock for all
other Options shall be as determined by the Committee.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than 10 years after the date of grant of the Option, and no
Non-Qualified Stock Option shall be exercisable more than 10 years and
one month after the date of grant of the Option.
(c) Transferability of Options.
(i) No Stock Option shall be transferable by the Optionee other than
by will, by the laws of descent and distribution or in accordance
with the provisions of Section 6.4(c)(ii).
(ii) Subject to applicable securities laws, the Committee may
determine that a Non-Qualified Stock Option may be transferred by
the Optionee to one or more members of the Optionee's Immediate
Family, as defined in Section 6.4(c)(iii), to a partnership of
which the only partners are members of the Optionee's Immediate
Family, or to a trust established by the Optionee for the benefit
of one or more members of the Optionee's Immediate Family. No
Transferee to whom or which a Non- Qualified Stock Option is
transferred may further transfer such Stock Option. A
Non-Qualified Stock Option transferred pursuant to this Section
shall remain subject to the provisions of the Plan, including,
but not limited to, the provisions of this Section 6 relating to
the exercise of the Stock Option upon the death, Disability,
Retirement or other termination of employment of the Optionee,
and shall be subject to such other rules as the Committee shall
determine.
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(iii)For purposes of this Article VI, "Immediate Family"of the
Optionee means the Optionee's spouse, parents, children and
grandchildren.
(d) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined
by the Committee. If the Committee provides that any Stock Option is
exercisable only in installments, the Committee may at any time waive
such installment exercise provisions, in whole or in part based on
such factors as the Committee may determine.
(e) Notwithstanding the foregoing, Incentive Stock Options shall not be
granted to any owner of 10% or more of the combined voting power of
the Company, unless the exercise price is at least 110% of the Fair
Market Value on the date of grant and the option states that it is not
exercisable after the expiration of five years from the date of grant.
(f) The aggregate fair market value (determined on the date the option is
granted) of shares subject to an Incentive Stock Option granted to an
Optionee in any calendar year shall not exceed $100,000.
(g) Termination by Death. Subject to Section 6.4(d), if an Optionee's
employment or service on the Board terminates by reason of death, any
Stock Option held by such Optionee or any Transferee of such Optionee
may thereafter be exercised, to the extent then exercisable or on such
accelerated basis as the Committee may determine, for a period of two
years from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that if the expiration of the stated term of any
such Stock Option is less than one year following the death of the
Optionee, the Stock Option shall be exercisable for a period of one
year from the date of such death.
(h) Termination by Reason of Disability. Subject to Section 6.4(d), if an
Optionee's employment or service on the Board terminates by reason of
Disability, any Stock Option held by such Optionee or any Transferee
of such Optionee may thereafter be exercised by the Holder, to the
extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine, for a period of two
years from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
is the shorter; provided, however, that, if the Holder dies while any
such Stock Option remains exercisable, any unexercised Stock Option
held
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by such Holder at death shall continue to be exercisable to the extent
to which it was exercisable at the time of the Holder's death for a
period of 12 months from the date of such death. In the event of
termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 6.4(d), if an
Optionee's employment or service on the Board terminates by reason of
Retirement, any Stock Option held by such Optionee or any Transferee
of such Optionee may thereafter be exercised by the Holder, to the
extent it was exercisable at the time of Retirement or on such
accelerated basis as the Committee may determine, for a period of
three years from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however that, if the Holder dies
within such three-year period, any unexercised Stock Option held by
such Holder shall, notwithstanding the expiration of such three-year
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the
date of such death. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be treated
as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 6.4(d), if an Optionee's
employment terminates for any reason other than death, Disability,
Retirement, or Cause (as hereinafter defined in Section 10.1(v)), any
Stock Option held by such Optionee or any Transferee of such Optionee
may thereafter be exercised by the Holder, to the extent it was
exercisable at the time of termination, for a period of three months
from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
is the shorter; provided, however, that if the Holder dies within such
three-month period, any unexercised Stock Options held by such Holder
shall, notwithstanding the expiration of such three- month period,
continue to be exercisable to the extent to which it was exercisable
at the time of death for a period of 12 months from the date of such
death. If an Optionee's employment is terminated for Cause (as
determined pursuant to section 10.1 (a)(v)), all rights
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under any Stock Option held by such Optionee or any Transferee of such
Optionee shall expire immediately upon the giving to the Optionee of
notice of such termination, unless otherwise determined by the
Committee. Notwithstanding anything to the contrary contained in this
plan, non-qualified options, at the determination of the Committee,
may be exercised after an Optionee's employment terminates.
(k) Method of Exercise. Stock Options shall be exercisable (i) during the
Holder's lifetime, only by the Holder or by the guardian or legal
representative of the Holder, and (ii) following the death of the
Holder, only by the person to whom they are transferred by will or the
laws of descent and distribution. For purposes of this Section 6.4(k)
only, the term "Holder" shall include any person to whom a Stock
Option is transferred by will or the laws of descent and distribution.
Subject to the provisions of this Article VI, Stock Options may be
exercised, in whole or in part, at any time during the option term by
giving written notice of exercise to the Company specifying the number
of shares to be purchased. Such notice shall be accompanied by payment
in full of the purchase price in cash (including check, bank draft,
money order, or such other instrument as the Company may accept).
Unless otherwise determined by the Committee at any time or from time
to time, payment in full or in part may also be made (i) by delivering
a duly executed notice of exercise together with irrevocable
instructions from the Holder to a broker to deliver promptly to the
Company sufficient proceeds from a sale or loan of the shares subject
to the Stock Option to pay the purchase price, or (ii) in the form of
Stock which is not Restricted Stock already owned by the Holder or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the Stock Option is exercised).
If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock,
such Restricted Stock (and any replacement shares relating thereto)
shall remain restricted in accordance with the original terms of the
Restricted Stock award in question, and any additional Stock received
upon the exercise shall be subject to the same forfeiture
restrictions, unless otherwise determined by the Committee.
Notwithstanding the foregoing, no shares of Stock shall be issued until
full payment therefor has been made. Subject to any forfeiture restrictions that
may apply if a Stock Option is exercised using Restricted Stock, a Holder shall
have all of the rights of a stockholder of the Company, including the right to
vote the shares and the right to receive dividends, with respect
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to shares subject to the Stock Option when the Holder has given written notice
of exercise, has paid in full for such shares, and, if requested, has given the
representation described in Section 14.1.
Shares issued upon exercise of a Stock Option shall be issued in the name
of the Holder or, at the request of the Holder, in the names of such Holder and
the Holder's spouse with right of survivorship as community property, community
property with right of survivorship or joint tenants.
(l) Cashing Out of Options. In any case when a Stock Option is exercised
after the death of a Holder, the Committee may elect to cash out all
or any part of the Stock Option by paying the person to whom the Stock
Option has been transferred by reason of the death of the Holder an
amount, in cash or shares of Stock, equal in value to the excess of
the Fair Market Value of the Stock over the option price on the
effective date of such cash out.
(m) Substitute Options. Stock Options or Stock Appreciation Rights may be
granted under the Plan from time to time in substitution for stock
options or stock appreciation rights held by employees of any
corporation who, as the result of a merger, consolidation, or
combination of such other corporation with, or the acquisition of all
or substantially all of the assets or stock of such other corporation
by, the Company or a Subsidiary, become employees of the Company or a
Subsidiary. The terms and conditions of any substitute Stock Options
or Stock Appreciation Rights so granted may vary from the terms and
conditions set forth in the Plan to such extent as the Committee at
the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the stock options or stock appreciation
rights in substitution for which they are granted; provided, however,
that in the event a stock option for which a substitute Stock Option
is being granted is an incentive stock option, no such variation shall
be permitted the effect of which would be to adversely affect the
status of any such substitute Stock Options as an Incentive Stock
Option.
(n) Deferral of Option Gains. An Optionee may elect to defer to a future
date receipt of the shares of Stock to be acquired upon exercise of a
Stock Option. Such election shall be made by delivering to the Company
not later than six months prior to the exercise of the Stock Option a
written notice of the election specifying the future date (the
"Deferral Date") for receipt of the shares. At any time, and from time
to time, prior to the delivery to the Optionee of shares
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the receipt of which has been deferred as provided in this section,
the Optionee may designate by written notice to the Company a new
date, which date shall be later than the Deferral Date, and such new
date shall thereafter be the Deferral Date with respect to such
shares.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 (a) Grant of Stock Appreciation Right A Stock Appreciation Right may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
Right may be granted only at the time of grant of such Stock Option. A
Stock Appreciation Right independent of a Stock Option grant may also
be awarded by the Committee, in which event the provisions of this
Article VII shall be applied for purposes of determining the operation
of such Stock Appreciation Right as if a Non-Qualified Stock Option
had been granted on the date of the grant of and in conjunction with
such independent Stock Appreciation Right.
(b) A Stock Appreciation right granted with respect to a given Stock
Option shall terminate and no longer be exercisable to the extent of
the shares with respect to which the related Stock Option is exercised
or terminates. A Stock Appreciation Right may be exercised by a Holder
in accordance with the provisions of this Article VII by surrendering
the applicable portion of the related Stock Option in accordance with
procedures established by the Committee. Upon such exercise and
surrender, the Holder shall be entitled to receive an amount
determined in the manner prescribed in Section 7.2. The Stock Option
which has been so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Right has been exercised.
(c) Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including, but not
limited to, the following:
(i) Exercisability. A Stock Appreciation Right shall be exercisable
only at such time or times and to the extent that the Stock
Option to which it relates is exercisable in accordance with the
provisions of Article VI and this Article VII; provided, however,
that a Stock Appreciation Right shall not be exercisable during
the first six months of its term by an Optionee who is actually
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or potentially subject to Section 16(b) of the Exchange Act,
unless otherwise determined by the Committee in the event of
death or Disability of the Optionee prior to the expiration of
the six- month period.
7.2 Payment Upon Exercise. Upon the exercise of a Stock Appreciation Right, a
Holder shall be entitled to receive an amount in cash, shares of Stock, or
both equal in value to the excess of the Fair Market Value on the date of
exercise of one share of Stock over the option exercise prior per share
specified in the related Stock Option multiplied by the number of shares in
respect of which the Stock Appreciation Right shall have been exercised.
The Committee shall have the right to determine the form of payment in each
case.
In the case of a Stock Appreciation Right held by an Optionee who is
actually or potentially subject to Section 16 of the Exchange Act, the
Committee may require that such Stock Appreciation Right be exercised only
in accordance with the applicable provisions of Rule 16b-3.
7.3 Non-transferability. A Stock Appreciation Right shall be transferable only
when and to the extent that the related Stock Option would be transferable
under Section 6.4(c).
7.4 Effect of Change in Control. The Committee may provide, at the time of
grant, that a Stock Appreciation Right can be exercised only in the event
of a Change in Control, subject to such terms and conditions as the
Committee may specify at grant. The Committee may also provide that, in the
event of a Change in Control, the amount to be paid upon the exercise of a
Stock Appreciation Right shall be based on the Change in Control price,
subject to such terms and conditions as the Committee may specify at grant.
ARTICLE VIII
RESTRICTED STOCK
8.1 Administration. Shares of Restricted Stock may be issued either alone or in
addition to other awards granted under the Plan. The Committee shall
determine the officers, employee and non-employee directors and
non-employee consultants to whom and the time or times at which grants of
Restricted Stock will be made, the number of shares to be awarded the time
or times within which such awards may be subject to forfeiture, and any
other terms and conditions of the awards, in addition to those contained in
Section 8.3. The Committee may condition the grant of Restricted Stock upon
the attainment of specified performance goals or such other factors or
criteria as the Committee shall determine.
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The provisions of Restricted Stock awards need not be the same with respect
to each recipient.
8.2 Awards and Certificates. Each participant receiving a Restricted Stock
award shall be issued a certificate in respect of such shares of Restricted
Stock. Such certificate shall be registered in the name of such participant
and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the following
form or such other form as authorized by the Committee:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Hauppauge Digital, Inc. 2000 Performance and Equity
Incentive Plan and a Restricted Stock Agreement. Copies of such Plan
and Agreement are on file at the offices of Hauppauge Digital, Inc.,
91 Cabot Court, Hauppauge, New York 11788.
The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in blank, relating
to the Stock covered by such award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 8.3(vi), during such period
commencing with the date of such award as shall be set by the
Committee (the "Restriction Period"), the participant shall not
be permitted to sell, assign, transfer, pledge, or otherwise
encumber shares of Restricted Stock. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in
whole or in part, based on service, performance, and such other
facts or criteria as the Committee may determine.
(ii) Except as provided in Section 8.3(i), the participant shall have,
with respect to the shares of Restricted Stock, all of the rights
of a stockholder of the Company, including the right to vote the
shares and the right to receive any cash dividends thereon;
provided, however, that the Committee may provide at the time of
an award that
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cash dividends shall be automatically deferred and reinvested in
additional Restricted Stock. Dividends on Restricted Stock which
are payable in Stock shall be paid in the form of additional
shares of Restricted Stock.
(iii)Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 8.3(i) and (iv), upon
termination of a participant's employment for any reason during
the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant.
(iv) In the event of the death of a participant during the Restriction
Period without a prior forfeiture of the Restricted Stock subject
to such Restriction Period, unlegended certificates for such
shares shall be delivered to the participant, except as otherwise
may be necessary with respect to any applicable securities laws.
(v) If and when the Restriction period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be
delivered to the participant, except as otherwise may be
necessary with respect to any applicable securities laws.
(vi) Each award shall be confirmed by, and be subject to the terms of,
a Restricted Stock Agreement which shall be executed by the
Company and the recipient of the Restricted Stock.
ARTICLE IX
LONG TERM PERFORMANCE AWARDS
9.1 Awards and Administration. Long Term Performance awards may be awarded
either alone or in addition to other awards granted under the Plan. The
Committee shall determine the nature, length, and starting date of the
performance period (the "Performance Period") for each Long Term
Performance Award, which shall be at least two years (subject to Article
X), and shall determine the performance objectives to be used in valuing
Long Term Performance awards and determining the extent to which such Long
Term Performance Awards have been earned. The maximum award for any
individual with respect to any one year of any Performance Period shall be
100,000 shares of Stock. Performance objectives may vary from participant
to participant and between groups of participants and shall be based upon
one or more of the following Company, Subsidiary, business unit, or
individual performance factors or criteria (on a pre- or post- tax
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basis and on an aggregate or per share basis) as the Committee may deem
appropriate; earnings, sales, Stock price, return on equity, assets or
capital, economic value added, cash flow, total shareholder return, costs,
margins, market share, any combination of the foregoing. Performance
Periods may overlap and participants may participate simultaneously with
respect to Long Term performance Awards that are subject to different
Performance Periods and different performance factors and criteria. Long
Term Performance Awards shall be confirmed by, and be subject to the terms
of, a Long Term Performance Award Agreement. The terms of such awards need
not be the same with respect to each participant.
(a) Adjustment of Awards. The Committee may adjust the performance goals
and measurements applicable to Long Term Performance Awards to take
into account changes in law and accounting and tax rules and to make
such adjustments as the Committee deems necessary or appropriate to
reflect the inclusion or exclusion of the impact of extraordinary or
unusual items, events, or circumstances in order to avoid windfalls or
hardships.
(b) Termination of Employment. Subject to Article X and unless otherwise
provided in the applicable Long Term Performance Award Agreement, if a
participant terminates employment during a Performance Period because
of death, Disability, or Retirement, such participant shall be
entitled to a payment with respect to each outstanding Long Term
Performance Award at the end of the applicable Performance Period;
(i) based, to the extent relevant under the terms of the award, upon
the participant's performance of the portion of such Performance
Period ending on the date of termination and the performance of
the Company or any applicable business unit for the entire
Performance Period, and
(ii) prorated for the portion of the Performance Period during which
the participant was employed by the Company or a Subsidiary, all
as determined by the Committee. The Committee may provide for an
earlier payment in settlement of such award in such amount and
under such terms and conditions as the Committee deems
appropriate. Subject to Article X and except as otherwise
provided in the applicable Long Term Performance Award Agreement,
if a participant terminates employment during a Performance
Period for any other reason, then such participant shall not be
entitled to any payment with respect to the Long Term Performance
Awards subject to such Performance Period, unless the
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Committee shall otherwise determine.
(c) Form of Payment. The earned portion of a Long Term Performance Award
may be paid currently or on a deferred basis and may provide for such
interest or earnings equivalent as the Committee may determine.
Payment shall be made in the form of cash or whole shares of Stock,
including Restricted Stock, or a combination thereof, either in a lump
sum payment or in annual installments, all as the Committee shall
determine.
ARTICLE X
CHANGE IN CONTROL PROVISIONS
10.1 Impact of Event. In the event of:
(a) a "Change in Control" as defined in Section 10.2, but only if and to
the extent so determined by the Committee, the following acceleration
and valuation provisions shall apply:
(i) Stock Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred and
not then exercisable and vested shall become fully exercisable
and vested as provided in Section 10.1(a)(v) below, unless the
terms of the award provide otherwise; provided, however, that, in
the case of Stock Appreciation rights held by an Optionee who is
actually subject to Section 16(b) of the Exchange Act, such Stock
Appreciation Rights shall not become exercisable and vested
unless they shall have been outstanding for at least six months
at the date such Change in Control is determined to have
occurred.
(ii) The restrictions and forfeiture provisions applicable to any
restricted Stock shall lapse, and such Restricted Stock shall
become fully vested, unless the terms of the award provide
otherwise.
(iii)The value of all outstanding Stock Options, Stock Appreciation
Rights, and Restricted Stock shall, unless otherwise determined
by the Committee at or after grant, if cashed out shall be on the
basis of the"Change in Control Price", as defined in Section
10.3, as of the date such change in Control is determined to have
occurred or such other date as the Committee may determine prior
to the Change in Control.
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(iv) Any outstanding Long Term Performance Awards shall, unless the
Committee otherwise determines, be vested and paid out based on
the prorated target results for the Performance Periods in
question, unless the Committee provides prior to the Change in
Control event for a different payment.
(v) Each Option, Stock Appreciation Right, Long Term Performance
Award or restricted stock award granted to an employee of the
Company shall vest or be exercisable upon termination of the
employee's employment within twenty-four (24) months from the
date of the Change in Control, unless the employee is terminated
for "Cause" or the employee resigns his employment without "Good
Reason". Except for death or disability, in which event the
Option, Stock Appreciation Right, Long Term Performance Award or
restricted stock award must be exercised within twelve (12)
months thereafter, the Employee shall have 30 days from after his
employment is terminated, after a Change in Control, to exercise
all unexercised Options, Stock Appreciation Rights, Long Term
Performance Awards, or restricted stock awards. "Cause" is
defined herein as the failure of the employee to properly perform
his duties on behalf of the Company, as reasonably determined by
the Committee in its sole discretion or as provided in the
Agreement making the grant. "Good Reason" shall be the assignment
to the Employee of duties inconsistent with his or her duties
prior to the Change in Control, or any other action (but not a
change in title) that results in a diminution of the Employee's
duties or responsibilities, other than an isolated, insubstantial
or inadvertent action which is remedied by the Company. In the
event that the employee is offered a position after a Change in
Control that has a salary and bonus level at least equal to that
in effect prior to the Change in Control, it shall be presumed
that the employee did not have Good Reason.
10.2 Definition of "Change in Control". For purposes of Section 10.1(a), a
"Change in Control" means a change in control of the Company of a nature
that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the effective date of the Plan,
pursuant to Section 13 or 15(d) of the Exchange Act; provided that, without
limitation, such a "Change in Control" shall be deemed to have occurred if:
(a) A third person, including a "group" as such term is
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used in Section 13(d)(3) of the Exchange Act, other than the trustee
of a Company employee benefit plan, becomes the beneficial owner,
directly or indirectly of 20 percent or more of the combined voting
power of the company's outstanding voting securities ordinarily having
the right to vote for the election of the Board;
(b) During any period of 24 consecutive months individuals who, at the
beginning of such consecutive 24-month period, constitute the Board of
Directors of the Company (the "Board" generally and as of the
effective date of the Plan the "Incumbent Board") cease for any reason
(other than Retirement upon reaching Normal Retirement age,
Disability, or death) to constitute at least a majority of the Board;
provided that any person becoming a director subsequent to the
effective date of the Plan whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least
three-quarters of the Directors comprising the Incumbent Board (other
than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(i) The Company shall cease to be a publicly owned corporation.
10.3 Change in Control Price. For purposes of this Section 10, "Change in
Control Price" means the highest price per share paid or offered in any
bona fide transaction related to an actual Change in Control of the Company
at any time during the preceding 60-day period as determined by the
Committee, except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall
be based only on transactions reported for the date on which the Committee
decides to cash out such Stock Options.
ARTICLE XI
RELOAD OPTIONS
11.1 Authorization of Reload Options Concurrently with an award of Stock
Options, the Committee may authorize reload options ("Reload Options") to
purchase a number of shares of Stock. The number of Reload Options shall
equal to the extent authorized by the committee:
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(a) the number of shares of Stock used to exercise the underlying Stock
Options and
(b) the number of shares of Stock used to satisfy any tax withholding
requirement incident to the exercise of the underlying Stock Options.
The grant of a Reload Option will become effective upon the exercise of
underlying Stock Options through the use of shares of Stock held by the
Optionee for at least 12 months. Notwithstanding the fact that the
underlying option may be an Incentive Stock Option, a Reload Option is not
intended to qualify as an Incentive Stock Option.
11.2 Reload Option Amendment Each option agreement shall state whether the
Committee has authorized Reload Options with respect to the underlying
Stock Options. Upon the exercise of an underlying Stock Option, the Reload
Option will be evidenced by an amendment to the underlying stock option
agreement.
11.3 Reload Option Price The option price per share of Stock deliverable upon
the exercise of a Reload Option shall be the Fair Market Value of a share
of Stock on the date the grant of the Reload Option becomes effective.
11.4 Term and Exercise Each Reload Option is fully exercisable six months from
the effective date of grant. The term of each Reload Option shall be equal
to the remaining option term of the underlying Stock Option.
11.5 Termination of Employment No additional Reload Options shall be granted to
Optionees when Stock Options are exercised pursuant to the terms of this
Plan following termination of the Optionee's employment.
ARTICLE XII
AMENDMENTS
12.1 Amendments to Plan The Board may amend, suspend, or discontinue the Plan or
any portion thereof at any time, but no amendment, suspension, or
discontinuation shall be made which would impair the rights of a Holder
under a Stock Option or a recipient of a Stock Appreciation Right,
restricted stock award, or Long Term Performance Award theretofore granted
without the Holder's or recipient's consent or which without the approval
of the Company's stockholders, would:
(a) except as expressly Provided in the Plan, increase the total number of
shares reserved for the purpose of the Plan;
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(b) decrease the option price of any Stock Option to less than the Fair
Market Value on the date of grant;
(c) change the class of employees eligible to participate in the Plan; or
(d) extend the maximum option periods under Section 6.4.
12.2 Amendments to Stock Options or Amounts The Committee may amend the terms of
any Stock Option or other award theretofore granted, prospectively or
retroactively, but no such amendment shall impair the right of any holder
without the holder's consent. Subject to the above provisions, the Board
shall have authority to amend the Plan to take into account changes in law
and tax and accounting rules, as well as other developments.
ARTICLE XIII
UNFUNDED STATUS OF PLAN
13.1 It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Certificates All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions. The Committee may require any Optionee purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in
writing that the Optionee is acquiring the shares without a view to the
distribution thereof.
14.2 Compensation Arrangements Nothing contained in this Plan shall prevent the
Company or a Subsidiary from adoption of other or additional compensation
arrangements for its employees.
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14.3 No Rights to Continued Employment Neither the adoption of the Plan nor the
granting of any Stock Option, Stock Appreciation Right, Restricted Stock or
Long Term Award shall confer upon any employee any right to continued
employment or constitute an agreement or understanding that the Company
will retain a director for any period of time or at any particular rate of
compensation, nor shall the same interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any employee or the
service of any director at any time.
14.4 Withholding and Employment Taxes No later than the date on which the
Company is required to withhold federal or state income taxes or employment
taxes in respect of an award, the participant shall pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local, or other taxes of any kind required by law to be
withheld with respect to such award or any payment or distribution made in
connection therewith. Unless otherwise determined by the Committee,
withholding or employment tax obligations may be settled with Stock,
including Stock that is part of the award that gives rise to the
withholding or employment tax requirements; provided, however, that in the
case of any Optionee who is actually subject to Section 16(b) of the
Exchange Act, any such settlement shall comply with the applicable
requirements of Rule 16(b)-3. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements, and the Company and
its Subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the participant.
14.5 Reinvestment of Dividends The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall be permissible
only if sufficient shares of Stock are available under Article III for such
reinvestment (taking into account then outstanding Stock Options and other
Plan awards).
14.6 Beneficiaries Designation The Committee shall establish such procedures as
it deems appropriate for a participant to designate a beneficiary to whom
any amounts payable with respect to outstanding awards under the Plan in
the event of the participant's death are to be paid.
14.7 Loan Program The Board may institute a loan program to assist one or more
participants in financing the exercise of outstanding options through
full-recourse interest bearing promissory notes. However, the maximum
amount of financing provided any optionee may not exceed the cash
consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of the shares.
14.8 Governing Law The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State
of New York, except
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where Delaware may otherwise be applicable.
14.9 Rule 16b-3 Requirement Notwithstanding anything in this Plan to the
contrary, if the Committee determines that the Plan or grant or award
cannot satisfy the requirements of Rule 16b-3, then it shall have the
authority to waive or modify those provisions of the Plan or grant or award
so as to enable compliance with Rule 16b-3.
ARTICLE XV
EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL
15.1 The Plan shall be effective as of May 9, 2000, subject however to the
approval of the Plan by the holders of at least a majority of the
outstanding shares of Stock of the Company present or represented and
entitled to vote at a meeting of shareholders of the Company. Awards may be
made under the Plan on and after its effective date; provided, however,
that any such awards shall be null and void if shareholder approval of the
Plan is not obtained within 12 months of the adoption of the Plan by the
Board.
ARTICLE XVI
TERM OF PLAN
16.1 No Stock Option, Stock Appreciation Right, restricted stock award, or Long
Term Performance award shall be granted on or after the tenth anniversary
of the effective date of the Plan, but awards granted prior to such tenth
anniversary (including, without limitation, Long Term Performance Awards
for Performance Periods commencing prior to such tenth anniversary) may
extend beyond that date.
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