EXHIBIT 4.1
Hauppauge Digital Inc. Employee Stock Purchase Plan
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HAUPPAUGE DIGITAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
INTRODUCTION
1.01 Purpose. The Hauppauge Digital Inc. Employee Stock Purchase Plan is
intended to provide a method whereby Employees of the Company will have
an opportunity to acquire a proprietary interest in the Company through
the purchase of shares of the Common Stock of the Company.
1.02 Rules of Interpretation. It is the intention of the Company to have the
Plan qualify as an "employee stock purchase plan" under Section 423 of
the Code. The provisions of the Plan shall be construed so as to extend
and limit participation in a manner consistent with the requirements of
that section of the Code.
ARTICLE II
DEFINITIONS
2.01 "Board" shall mean the board of directors of the Company.
2.02 "Company" shall mean Hauppauge Digital, Inc. and its Subsidiary
Corporations.
2.03 "Common Stock" shall mean the $.01 par value common stock of Hauppauge
Digital, Inc.
2.04 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.05 "Compensation" shall mean the gross cash compensation (including, wage,
salary, commission and overtime earnings) paid by the Company to a
participant in accordance with the terms of employment, but excluding all
bonus payments, expense allowances and compensation paid in a form other
than cash.
2.06 "Committee" shall mean the individuals described in Article XI.
2.07 "Employee" shall mean any person employed by the Company on a full-time
or part-time basis, who is regularly scheduled to work more than twenty
(20) hours per week and whose customary employment is for more than five
(5) months in any calendar year.
2.08 "Plan" shall mean the Hauppauge Digital, Inc. Employee Stock Purchase
Plan, as set forth herein and as hereinafter amended from time to time.
2.09 "Offerings" shall mean offerings as defined in Section 4.02.
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(a) "Offering Commencement Date" shall mean as defined in Section
4.02.
(b) "Offering Termination Date" shall mean as defined in Section 4.02.
2.10 "Option Price" shall mean the option price as defined in Section 6.02.
2.11 "Plan Representative" shall mean any person designated from time to time
by the Committee to receive certain notices and take certain other
administrative actions relating to participation in the plan.
2.11 "Subsidiary Corporation" shall mean any present or future corporation
which (i) is or becomes a "subsidiary corporation" of Hauppauge Digital,
Inc. as the term is defined in Section 424(b) of the Code and (ii) is
designated as a participant in the Plan by the Committee.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Initial Eligibility. Each Employee who shall have completed six (6)
consecutive months of employment with the Company and shall be employed
by the Company on the date his participation in the Plan is to become
effective shall be eligible to participate in Offerings under the Plan
which commence after such six-month period has concluded. Persons who are
not Employees shall not be eligible to participate in the Plan.
3.02 Leave of Absence. For purposes of participation in the Plan, a person on
leave of absence shall be deemed to be an Employee for the first ninety
(90) days of such leave of absence and such Employee's employment shall
be deemed to have terminated at the close of business on the 90th day of
such leave of absence unless such Employee shall have returned to regular
full-time or part-time employment (as the case may be) prior to the close
of business on such 90th day. Termination by the Company of any
Employee's leave of absence, other than termination of such leave of
absence on return to full time or part time employment, shall terminate
an Employee's employment for all purposes of the Plan and shall terminate
such employee's participation in the Plan and the right to exercise any
option.
3.03 Restrictions on Participation. Notwithstanding any provision of the Plan
to the contrary, no Employee shall be granted an option to purchase
shares of Common Stock under the Plan:
(a) if, immediately after the grant, such Employee would own stock
and/or hold outstanding options to purchase stock possessing 5% or
more of the total combined voting power or value of all classes of
stock of the Company (for purposes of this paragraph, the rules of
Section 424(d) of the Code shall apply in determining stock
ownership of any Employee); or
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(b) which permits such Employee's rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate
which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
3.04 Commencement of Participation. An eligible Employee may become a
participant by completing an authorization for payroll deductions on the
form provided by the Company and filing the completed form with the Plan
Representative on or before the filing date set therefor by the
Committee, which date shall be prior to the Offering Commencement Date
for the next following Offering. Payroll deductions for a participant
shall commence on the next following Offering Commencement Date after the
Employee's authorization for payroll deductions becomes effective and
shall continue until termination of the Plan or the participant's earlier
termination of participation in the Plan. Each participant in the Plan
shall be deemed to continue participation until termination of the Plan
or such participant's earlier termination of the participation in the
Plan pursuant to Article VIII below.
ARTICLE IV
STOCK SUBJECT TO THE PLAN AND OFFERINGS
4.01 Stock Subject to the Plan. Subject to the provisions of Section 12.04 of
the Plan, the Company's's Board shall reserve initially for issuance
under the Plan an aggregate of One Hundred Thousand (100,000) shares of
Common Stock which shares shall be authorized but unissued shares of
Common Stock.
4.02 Offerings. Except as described below with respect to the first year the
Plan is in effect, the Plan will be implemented by four annual offerings
of the Company's Common Stock each calendar year until December 31, 2003
to be divided as provided below. There will be two (2) Offerings in
calendar 2000, the first of which will begin on August 1, 2000 and end on
September 30, 2000 and the second shall commence on October 1, 2000 and
end on December 31, 2000. Thereafter, in each year that the Plan is in
effect, the first Offering will begin on January 1 and end on March 31,
the second Offering will begin on April 1 and end on June 30, the third
Offering will begin on July 1 and end on September 30, and the fourth
Offering will begin on October 1 and end on December 31. The first day of
each Offering shall be deemed the "Offering Commencement Date" and the
last day the "Offering Termination Date" for such Offering. In each
Offering, the maximum number of shares that may be issued shall be 10,000
plus unissued shares from all prior Offerings whether offered or not.
4.03 Maximum Number of Shares. If the total number of shares for which options
are exercised on any Offering Termination Date exceeds the maximum number
of shares for the applicable Offering, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in a
nearly uniform manner as shall be practicable and as it shall determine
to be equitable, and the balance of payroll
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deductions credited to the account of each participant under the Plan
shall be returned to such participant as promptly as possible.
ARTICLE V
PAYROLL DEDUCTIONS
5.01 Amount of Deduction. The form described in Section 3.04 will permit a
participant to elect payroll deductions of any whole percentage from one
percent (1%) through ten percent (10%) of such participant's Compensation
for each pay period during an Offering.
5.02 Participant's Account. All payroll deductions made for a participant
shall be credited to an account established for such participant under
the Plan. A participant may not make any separate cash payment into such
account, except when on leave of absence and then only as provided in
Section 5.04.
5.03 Changes in Payroll Deductions. A participant may discontinue
participation in the Plan as provided in Article VIII. A participant may
reduce or increase future payroll deductions (within the limits described
in Section 5.01) by filing with the Plan Representative a form provided
by the Company for such purpose. The effective date of any increase or
reduction in future payroll deductions will be the first day of the next
pay period succeeding processing of the change form.
5.04 Leave of Absence. If a participant goes on a leave of absence, such
participant shall have the right to elect: (a) to withdraw the balance in
his or her account pursuant to Section 7.02, (b) to discontinue
contributions to the Plan but remain a participant in the Plan, or remain
a participant in the Plan during such leave of absence, authorizing
deductions to be made from payments by the Company to the participant
during such leave of absence and undertaking to make cash payments to the
Plan at the end of each payroll period to the extent that amounts payable
by the Company to such participant are insufficient to meet such
participant's authorized Plan deductions.
ARTICLE VI
GRANTING OF OPTION
6.01 Number of Option Shares. On the Commencement Date of each Offering, each
participating Employee shall be deemed to have been granted an option to
purchase a maximum number of shares of Common Stock equal to (i) that
percentage of the Employee's Compensation which the Employee has elected
to have withheld (but not in any case in excess of 10%) multiplied by
(ii) the Employee's Compensation during the Offering then divided by
(iii) the applicable Option Price determined as provided in Section 6.02
below.
6.02 Option Price. The option price of stock purchased with payroll deductions
made during any Offering for a participant therein shall be the lower of:
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a. 85% of the closing price of the stock on the Offering Commencement
Date for such Offering or the nearest prior business day on which
trading occurred on the NASDAQ National Market System; or
b. 85% of the closing price on the Offering Termination Date for such
Offering or the nearest prior business day on which trading
occurred on the NASDAQ National Market System.
If the Common Stock of the Company is not admitted to trading on
any of the aforesaid dates for which closing prices of the stock
are to be determined, the reference shall be made to the fair
market value of the stock on each such date, as determined on such
basis as shall be established or specified for the purpose by the
Committee.
ARTICLE VII
EXERCISE OF OPTION
7.01 Automatic Exercise. Each Plan participant's option for the purchase of
stock with payroll deductions made during an Offering shall be deemed to
have been exercised automatically on the applicable Offering Termination
Date for the purchase of the number of full shares of Common Stock which
the accumulated payroll deductions in the participant's account at the
time will purchase at the applicable Option Price (but not in excess of
the number of shares for which outstanding options have been granted to
the participant pursuant to Section 6.01).
7.02 Withdrawal of Account. No participant in the Plan shall be entitled to
withdraw any amount from the accumulated payroll deductions in his or her
account; provided, however, that a participant's accumulated payroll
deductions shall be refunded to the participant's as and to the extent
specified in Section 8.01 below upon termination of such participant's
participation in the Plan.
7.03 Fractional Shares. Fractional shares of Common Stock will not be issued
under the Plan. Any accumulated payroll deductions which would have been
used to purchase fractional shares, unless refunded pursuant to Section
7.02 above, will be held for the purchase of Common Stock in the next
following Offering, without interest.
7.04 Exercise of Options. During a participant's lifetime, options held by
such participant shall be exercisable only by that participant.
7.05 Delivery of Stock. As promptly as practicable after the Offering
Termination Date of each Offering, the Company will deliver to each
participant of such Offering, as appropriate, the shares of Common Stock
purchased therein upon exercise of such participant's option.
7.06 Stock Transfer Restrictions. The Plan is intended to satisfy the
requirements of
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Section 423 of the Code. A participant will not obtain the benefits of
this provision if such participant disposes of shares of Common Stock
acquired pursuant to the Plan within two (2) years from the Offering
Commencement Date or within one (1) year from the date such Common Stock
is purchased by the participant, whichever is later.
ARTICLE VIII
WITHDRAWAL
8.01 In General. A participant may stop participating in the Plan at any time
by giving written notice to the Plan Representative. Upon processing of
any such written notice, no further payroll deductions will be made from
the participant's Compensation during such Offering or thereafter, unless
and until such participant elects to resume participation in the Plan by
providing written notice to the Plan Representative pursuant to Section
3.04 above. Such participant's payroll deductions accumulated prior to
processing of such notice shall be applied toward purchasing full shares
of Common Stock in the then-current Offering as provided in Section 7.01
above. Any cash balance remaining after the purchase of shares in such
Offering shall be refunded promptly to such participant.
8.02 Effect on Subsequent Participation. A participant's withdrawal from any
Offering will not have any effect upon such participant's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company and for which such participant is
otherwise eligible.
8.03 Termination of Employment. Upon termination of a participant's employment
with the Company for any reason, including retirement or death, the
participant's payroll deductions accumulated prior to such termination,
if any, shall be applied toward purchasing full shares of Common Stock in
the then-current Offering, and any cash balance remaining after the
purchase of shares in such Offering shall be refunded to him or her, or,
in the case of his or her death, to the person or persons entitled
thereto under Section 12.01, and his or her participation in the Plan
shall be deemed to be terminated.
8.04 Leave of Absence. A participant on leave of absence shall, subject to the
election made by such participant pursuant to Section 5.04, continue to
be a participant in the Plan so long as such participant is on continuous
leave of absence. A participant who has been on leave of absence for more
than ninety (90) days and who therefore is not an Employee for the
purpose of the Plan shall not be entitled to participate in any offering
commencing after the 90th day of such leave of absence. Notwithstanding
any other provisions of the Plan, unless a participant on leave of
absence returns to regular full time or part time employment with the
Company at the earlier of: (a) the termination of such leave of absence
or (b) three months from the 90th day of such leave of absence, such
participant's participation in the Plan shall terminate on whichever of
such dates first occurs.
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ARTICLE IX
INTEREST
9.01 Payment of Interest. No interest will be paid or allowed on any money
paid into the Plan or credited to the account of or distributed to any
participant Employee.
ARTICLE X
STOCK
10.01 Participant's Interest in Option Stock. No participant will have any
interest in shares of Common Stock covered by any option held by such
participant until such option has been exercised as provided in Section
7.01 above.
10.02 Restrictions on Exercise. Shares of Common Stock purchased by a
participant under the Plan will be registered in the name of the
participant, or, if the participant so directs by written notice to the
Plan Representative prior to the Offering Termination Date applicable
thereto, in the names of the participant and one such other person as may
be designated by the participant, as joint tenants with rights of
survivorship or as tenants by the entireties, to the extent permitted by
applicable law.
10.03 Restrictions on Exercise. The Board may, in its discretion, require as
conditions to the exercise of any option with respect to the underlying
shares that either:
a. A registration statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or
b. The participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is his or
her intention to purchase the shares for investment and not for
resale or distribution.
ARTICLE XI
ADMINISTRATION
11.01 Appointment of Committee. The Board shall appoint a committee (the
"Committee") to administer the Plan, which shall be composed of two or
more members who are non-employee directors as defined under Rule 16b - 3
as promulgated by the Securities and Exchange Commission under Section
16(b) of the Exchange Act as amended from time to time or the Board.
11.02 Authority of Committee. Subject to the express provisions of the Plan,
the Committee shall have plenary authority in its discretion to interpret
and construe any and all provision of the Plan, to adopt rules and
regulations for administering the Plan. The Committee's determination of
the foregoing matters shall be conclusive.
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11.03 Rules Governing the Administration of the Committee. The Board may from
time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee may select one of its members as
its chairman, shall hold its meetings at such times and places as it
shall deem advisable, and may hold telephonic meetings. All
determinations of the Committee shall be made by a majority of the
members of the Committee shall be as fully effective as if it had been
made by a majority vote at a meeting duly called and held. The Committee
may appoint a Secretary and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
ARTICLE XII
MISCELLANEOUS
12.01 Designation of Beneficiary. A participant may file with the Plan
Representative a written designation of a beneficiary who is to receive
any shares of Common Stock and/or cash under the Plan upon the
participant's death. Such designation of beneficiary may be changed by
the participant at any time by written notice to the Plan Representative.
Upon the death of a participant and receipt of by the Company of proof of
identity and existence at the participant's death of a beneficiary
validly designated by the participant under the Plan, and subject to
Article VIII above concerning withdrawal from the Plan, the Company shall
deliver such shares of Common Stock and/or cash to such beneficiary. In
the event of the death of a participant lacking a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares of Common Stock and/or cash
to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares of
Common Stock and/or cash to the spouse or to any one or more dependants
of the participant, in each case without any further liability of the
Company whatsoever under or relating to the Plan. No beneficiary shall,
prior to the death of the participant by whom he or she has been
designated, acquire any interest in the shares of Common Stock and/or
cash credited to the participant under the Plan.
12.02 Transferability. Neither payroll deductions credited to any participant's
account nor any option or rights with regard to the exercise of any
option or to receive Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the
participant other than by will or the laws of descent and distribution.
Any such attempted assignment, transfer, pledge or other disposition
shall be without effect, except that the Company may, in its discretion,
treat such act as an election to withdraw from participation in the Plan
in accordance with Section 8.01.
12.03 Use of Funds. All payroll deductions received and/or held by the Company
under
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the Plan maybe used by the Company for any corporate purpose. The Company
shall not be obligated to segregate such payroll deductions.
12.04 Adjustment Upon Changes in Capitalization.
a. If, while any options are outstanding under the Plan, the
outstanding shares of Common Stock of the Company have increased,
decreased, changed into, or been exchanged for a different number
or kind of shares or securities of the Company through any
reorganization, merger, recapitalization, reclassification, stock
split, reverse stock split or similar transaction, appropriate and
proportionate adjustments may be made by the Committee in the
number and/or kind of shares which are subject to purchase under
outstanding options and in the Option Price or Prices applicable
to such outstanding options. In addition, in any such event, the
number and/or kind of shares which may be offered in the Offerings
described in Article IV hereof shall also be proportionately
adjusted. No such adjustments shall be made for or in respect to
stock dividends. For purposes of this paragraph, any distribution
of shares of Common Stock to shareholders in an amount aggregating
20% or more of the outstanding shares of Common Stock shall be
deemed a stock split, and any distribution of shares aggregating
less than 20% of the outstanding shares of Common Stock shall be
deemed a stock dividend.
b. Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the
property or capital stock of the Company to another corporation,
the holder of each option then outstanding under the Plan will
thereafter be entitled to receive at the next Offering Termination
Date, upon the exercise of such option, for each share as to which
such option shall be exercised, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of
one share of the Common Stock was entitled to receive upon and at
the time of such transaction. The Board shall take such steps in
connection with such transactions as the Board shall deem
necessary to assure that the provisions of this Section 12.04
shall thereafter be applicable, as nearly as reasonably may be
determined, in relation to the said cash, securities and/or
property as to which each such holder of any such option might
hereafter be entitled to receive.
12.05 Amendment and Termination. The Board shall have complete power and
authority to terminate or amend the Plan; provided, however, that the
Board shall not, without the approval of the shareholders of the Company,
alter (i) the aggregate number of shares of Common Stock which may be
issued under the Plan (except pursuant to Section 12.04 above), or (ii)
the class of employees eligible to receive options under the Plan, other
than to designate additional Subsidiary Corporations as
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Eligible Subsidiary Corporations; and provided further, however, that no
termination, modification, or amendment of the Plan may, without the
consent of an Employee then having an option under the Plan to purchase
shares of Common Stock, adversely affect the rights of such Employee
under such option.
12.06 Effective Date. The Plan shall become effective as of May 9, 2000,
subject to approval by the holders of a majority of the shares of Common
Stock present and represented at any special or annual meeting of the
shareholders of the Company duly held within 12 months after adoption of
the Plan. If the Plan is not so approved, the Plan shall not become
effective.
12.07 No Employment Rights. The Plan does not, directly or indirectly, create
in any person any right with respect to continuation of employment by the
Company or any Subsidiary Corporation, and it shall not be deemed to
interfere in any way with the Company's or any Subsidiary Corporation's
right to terminate, or otherwise modify, any Employee's employment at any
time.
12.08 Effect of Plan. The provisions of the Plan shall, in accordance with its
terms, be binding upon, and inure to the benefit of, all successors of
each Employee participating in the Plan, including, without limitation,
such Employee's estate and the executors, administrators or trustees
thereof, heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
12.09 Governing Law. The law of the State of New York will govern all matters
relating to this Plan except to the extent superseded by the State of
Delaware or the federal laws of the United States.
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