-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VKelXcWkaJoTdmCSI+ijwbQngomkXQ3d5Jr12Gkcr8lumFQQ4LirvP9ORSsjfTzy 8eePmgw/H3irgr2RUfCWcQ== 0000909654-02-000436.txt : 20020607 0000909654-02-000436.hdr.sgml : 20020607 20020606153926 ACCESSION NUMBER: 0000909654-02-000436 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDREA ELECTRONICS CORP CENTRAL INDEX KEY: 0000006494 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 110482020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04324 FILM NUMBER: 02672234 BUSINESS ADDRESS: STREET 1: 45 MELVILLE PARK ROAD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5167191800 MAIL ADDRESS: STREET 1: 45 MELVILLE PARK ROAD CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: ANDREA RADIO CORP DATE OF NAME CHANGE: 19911204 10-K/A 1 andreaform10ka.txt 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------- FORM 10-K/A (AMENDMENT NO. 2) FOR ANNUAL TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 2001 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from __________ to _______________ Commission File No.: 1-4324 ANDREA ELECTRONICS CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 11-0482020 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 45 MELVILLE PARK ROAD, MELVILLE, NEW YORK 11747 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (631) 719-1800 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.50 per share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. -------. As of May 31, 2002, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $12,787,686 (based on the closing sale price on the American Stock Exchange). The number of shares outstanding of the Registrant's Common Stock as of May 31, 2002, was 19,086,098. 2 PART IV Item 14 to the Annual Report on Form 10-K of Andrea Electronics Corporation for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on April 1, 2002 and as amended on April 29, 2002, is hereby amended and restated in its entirety to include the Master Preferred Escrow Agreement as an attachment to Exhibit 10.18. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (a)(1) Financial Statements The following financial statements of Andrea Electronics Corporation, the notes thereto, the related reports thereon of independent public accountants, and financial statement schedules are filed under Item 8 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001.
Page Report of Independent Public Accountants................................................................. F-1 Consolidated Balance Sheets at December 31, 2001 and 2000................................................ F-2 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 F-3 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 2001, 2000 and 1999................................................................................... F-4 Consolidated Statements of Cash Flows for the three years ended December 31, 2001, 2000 and 1999................................................................................... F-5 Notes to Consolidated Financial Statements............................................................... F-6 (2) Index To Financial Statement Schedules Report of Independent Public Accountants on Schedule..................................................... S-1 Schedule II - Valuation and Qualifying Accounts.......................................................... S-2 (3) Exhibits See (c) below. (b) Reports On Form 8-K The Registrant did not file any reports on Form 8-K during the three-month period ended December 31, 2001. (c) Exhibits
3 INDEX TO EXHIBITS Exhibit Number Description - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Form 10-K for the year ended December 31,1992) 3.2 Certificate of Amendment of the Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.2 of the Registrant's Form 10-K for the year ended December 31,1997) 3.3 Certificate of Amendment of the Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed November 30, 1998) 3.4 Certificate of Amendment to the Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed June 22, 1999) 3.5 Certificate of Amendment to the Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed October 12, 2000) 3.6 Certificate of Amendment to the Certificate of Incorporation of the Registrant dated August 22, 2001(incorporated by reference to Exhibit 3.6 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 3.7 Amended By-Laws of Registrant (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K filed November 30, 1998) 4.1 Securities Purchase Agreement, dated as of June 10, 1998, relating to the sale of the Registrant's 6% Convertible Notes due June 10, 2000 (with forms of Note and Registration Rights Agreement attached thereto) (incorporated by reference to Exhibit 4.1 of the Registrant's Form S-3, No. 333-61115, filed August 10, 1998) 4.2 Securities Purchase Agreement, dated June 11, 1999, by and between HFTP Investment L.L.C. and the Registrant (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed June 22, 1999) 4.3 Registration Rights Agreement, dated June 11, 1999, by and between HFTP Investment L.L.C. and the Registrant (incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K filed June 22, 1999) 4.4 Form of Warrant by and between HFTP Investment L.L.C. and the Registrant (incorporated by reference to Exhibit 4.3 of the Registrant's Current Report on Form 8-K filed June 22, 1999) 4.5 Securities Purchase Agreement, dated October 5, 2000, by and between HFTP Investment L.L.C. and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed October 12, 2000) 4 4.6 Registration Rights Agreement, dated October 5, 2000 by and between HFTP Investment L.L.C. and the Registrant (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed October 12, 2000) 4.7 Rights Agreement dated as of April 23, 1999 between Andrea and Continental Stock Transfer and Trust Company, as Rights Agent, including the form of Certificate of Amendment to Certificate of Incorporation as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Shares of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed May 7, 1999) 10.1 1991 Performance Equity Plan, as amended (incorporated by reference to Exhibit 4 of the Registrant's Registration Statement on Form S-8, No. 333-45421, filed February 2, 1998) 10.2 1998 Stock Plan of the Registrant, as amended (incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form S-8, No. 333-82375, filed July 7, 1999) 10.3* Procurement Agreement, dated June 16, 1995, by and between International Business Machines Corporation and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q for the three month period ended June 30, 1995) 10.4* License and Technical Support Agreement, dated as of October 3, 1995, by and between BellSouth Products, Inc. and the Registrant (incorporated by reference to Exhibit 10.4 of the Registrant's Form 10-K for the year ended December 31, 1995) 10.5* Software License Bundling Agreement, dated as of March 29, 1996, by and between Voxware, Inc., and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q for the six month period ended June 30, 1996) 10.6 Employment Agreement, dated as of April 12, 2000, by and between John N. Andrea and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q for the three months ended March 31, 2000) 10.7 Employment Agreement, dated as of April 12, 2000, by and between Douglas J. Andrea and the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant's Form 10-Q for the three months ended March 31, 2000) 10.8 Employment Agreement, dated as of January 1, 1998, by and between Patrick D. Pilch and the Registrant (incorporated by reference to Exhibit 10.8 of the Registrant's Form 10-K for the year ended December 31, 1997) 10.9 Employment Agreement, dated as of November 20, 1998, by and between Christopher P. Sauvigne and the Registrant (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed November 30, 1998) 10.10* Production Procurement Agreement, dated as of June 11, 1997, by and between International Business Machines Corporation and the Registrant (incorporated by reference to Exhibit 10.9 of the Registrant's Form 10-K for the year ended December 31, 1997) 5 10.11 Revolving Loan and Security Agreement, dated as of September 23, 1997, by and between IBM Credit Corporation and the Registrant (incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K for the year ended December 31, 1997) 10.12 Stock Purchase Agreement, dated April 6, 1998, as amended by Amendment No. 1 thereto dated May 5, 1998, relating to the purchase of the shares of Lamar Signal Processing, Ltd. (including form of Registration Rights Agreement) (incorporated by reference to Exhibits 2.1 and 2.2 of the Registrant's Current Report on Form 8-K filed May 8, 1998) 10.13* Procurement Agreement, dated as of January 13, 1999, by and between the Registrant and Microsoft Corporation (incorporated by reference to Exhibit 10.15 of the Registrant's Form 10-K for the year ended December 31, 1998) 10.14* Purchase Agreement, dated as of February 25, 1999, by and between Andrea and Clarion Corporation of America (incorporated by reference to Exhibit 10.16 of the Registrant's Form 10-K for the year ended December 31, 1998) 10.15* Source Code License Agreement, dated as of October 29, 1998, between Andrea and Intel Corporation (incorporated by reference to Exhibit 10.17 of the Registrant's Form 10-K for the year ended December 31, 1998) 10.16 Employment Agreement, dated as of April 12, 2000, by and between Richard A. Maue and the Registrant (incorporated by reference to Exhibit 10.3 of the Registrant's Form 10-Q for the three months ended March 31, 2000) 10.17** Licensing Agreement, dated as of December 19, 2001, by and between Andrea and Analog Devices, Inc. (incorporated by reference to Exhibit 10.17 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 10.18** Licensing Agreement, Amendment No. 1, dated as of March 13, 2002, by and between Andrea and Analog Devices, Inc. 10.19** Licensing Agreement, dated as of March 13, 2002, by and between Andrea and Analog Devices, Inc. (incorporated by reference to Exhibit 10.19 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 10.20 Acknowledgment and Agreement, dated as of March 28, 2002, by and between Andrea and HFTP Investment LLC (including attached Waiver Agreement and Security Agreement) (incorporated by reference to Exhibit 10.20 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 10.21 Pledge Agreement, dated as of March 28, 2002, by and between Andrea and HFTP Investment LLC (incorporated by reference to Exhibit 10.21 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 21 Subsidiaries of Registrant (incorporated by reference to Exhibit 21 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 23 Consent of Independent Public Accountants (incorporated by reference to Exhibit 23 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) 6 99 Letter regarding representations of Arthur Andersen LLP (incorporated by reference to Exhibit 99 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001) - ------------------------- * Certain portions of this Agreement have been accorded confidential treatment. ** Request for confidential treatment was filed for portions of these documents. Confidential portions have been omitted, and filed separately with the Securities and Exchange Commission, as required by Rule 24b-2. (d) FINANCIAL STATEMENT SCHEDULES See Item 14(a)(2) 7 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANDREA ELECTRONICS CORPORATION By: /s/ Christopher P. Sauvigne --------------------------------------------- Name: Christopher P. Sauvigne Date: June 5, 2002 Title: President and Chief Executive Officer EX-10 3 andrea10kaexh1018.txt 8 EXHIBIT 10.18 LICENSING AGREEMENT, AMENDMENT # 1., DATED AS OF MARCH 13, 2002, BETWEEN ANDREA ELECTRONICS CORPORATION AND ANALOG DEVICES, INC. 9 LICENSING AGREEMENT Between Andrea Electronics Corporation And Analog Devices, Inc. Amendment #1 This Amendment #1 ("the Amendment"), is entered into this March 13, 2002. When duly executed by the Parties, this Amendment #1 will be an amendment to the Licensing Agreement entered into on December 19, 2001 (the "Agreement"), by and between Andrea Electronics Corporation ("Andrea"), and Analog Devices, Inc. ("ADI"). This Amendment hereby amends the Agreement as follows: 1. GRANT OF LICENSES; PROTECTION OF GOODWILL AND REPUTATION; PATENTS, ----------------------------------------------------------------------- COPYRIGHTS AND TRADEMARKS. -------------------------- 1.1 Andrea grants to ADI: a. a worldwide, perpetual, fully paid royalty-bearing license, including the right to sublicense to ADI CODEC chip customers, Andrea's PureAudio algorithm and updates for use on PC's, excluding handheld computing devices such as tablet PCs and PDAs; and b. a worldwide, royalty-free license, including the right to sublicense to ADI CODEC chip customers and/or end users, to load Andrea's EchoStop and DSDA algorithms and updates for use on PC's, excluding handheld computing devices such as tablet PCs and PDAs, subject to said chip customers and/or end users entering into a terms of use agreement directly with Andrea to enable either or both Licensed Algorithms. Should ADI desire to use the Licensed Algorithms for purposes or devices other than those described above, the terms of such use shall be subject to one or more separate license agreements between ADI and Andrea. Updates shall include minor enhancements to performance, functionality and features. Except as the Parties may otherwise agree, ADI may not, modify, translate, disassemble, decompile, reverse engineer or create derivative works based on the Licensed Algorithms. The Licensed Algorithms are protected by United States and international copyright law and treaties, as well as other intellectual property law and treaties, and ADI is granted no title or ownership rights, in or to the Licensed Algorithms, in whole or in part, and ADI acknowledges that title to all copyrights, patents, know-how, trade secrets and/or any other intellectual property rights to and in the Licensed Algorithms and associated documentation are and shall remain the property of Andrea and its successors or assigns. As such, ADI warrants that it will not sell or sub-license the Licensed Algorithms except as provided herein. 10 2. ROYALTY. ------- 2.1 In consideration of the license granted under this Section 1.1.a, ADI shall pay to Andrea a one-time, lump-sum royalty equal to [*******] U.S. dollars [*******]. Payment shall be due and payable on May 5, 2002. Notwithstanding the foregoing, any payments previously made by ADI under the Agreement prior to the execution of this Amendment shall be credited to the payment of this royalty. 3. JOINT PROMOTION. --------------- The following sentences are added to the end of this Section 3: It is also understood that any profits derived from Andrea's products supporting the Licensed Algorithms, excluding two-channel microphone arrays, that serve as companions to ADI's products incorporating the Licensed Algorithms will be divided equally among the Parties. Profits shall be defined as the selling price of the product less all costs typically associated with manufacturing and selling the products, including, but not limited to, sales commissions, marketing and advertising expenses and warranty costs. Notwithstanding the forgoing, Andrea shall be entitled to all profits derived from Andrea's two-channel microphone array. 5. TERM AND TERMINATION. -------------------- 5.1 The term of this Agreement shall commence on May 1, 2002 hereof and shall continue for a period of one (1) year and shall thereafter automatically renew for additional one year periods unless ADI expresses its desire not to renew in writing at least thirty (30) days prior to expiration of the initial or successive period, or unless Andrea expresses its desire not to renew in writing at least one (1) year prior to the expiration of any applicable successive period commencing on May 5, 2004 or thereafter. Notwithstanding the foregoing, the license granted to ADI under Section 1.1.a of this Agreement is perpetual and therefore may not be terminated by Andrea for any reason other than those in Section 5.2 of this Agreement. 8. GENERAL PROVISIONS. ------------------ 8.11 Survival. The terms of Section 1.4, 1.5, 4, 5.4, 6, 7, 8.1, 8.3, 8.5, -------- 8.6 and 8.8 shall survive expiration or termination of this Agreement, whether pursuant to Section 5 or otherwise. The terms of Section 8.12 shall survive expiration or termination of this Agreement unless such termination is pursuant to Section 5.2 as a result of a breach by ADI. 8.12 Escrow Agreement. Within a commercially reasonable period of time ---------------- following the execution of this Amendment, such period not to exceed 60 days, Andrea and ADI shall enter into an escrow agreement with an independent third party escrow agent consistent with the agreement attached as Exhibit A to this Amendment, to hold the Licensed Technology (as defined below) under this Agreement in escrow for ADI. All fees due to the escrow agent are to be shared equally by Andrea and ADI. Upon execution of the escrow agreement, Andrea shall deliver the source code and copies of sufficient technical documentation to escrow agent to permit ADI to effectively utilize source code of the Licensed Algorithms, including, but not limited to, all available source 11 documentation for the licensed software and any updates thereof (the "Licensed Technology"). ADI shall be entitled to release of the Licensed Technology upon: (a) the rejection or termination of this Agreement, as Amended, by Andrea or its successors or representatives in breach of the provisions of the Agreement or this Agreement, including in all events any rejection or termination of the Agreement or any proposal to do so under Title 11 of the United States Code, as now constituted or hereafter amended (the "Bankruptcy Code"), or any other federal or state bankruptcy, insolvency, receivership, or similar law; (b) the failure of a trustee, including Andrea as debtor in possession, in any bankruptcy case filed by or against Andrea either to assume the Agreement and this Amendment within fifteen (15) days after the filing of the initial bankruptcy petition or to perform the Agreement and this Amendment within the meaning of Section 365(a)(4)(i) of the Bankruptcy Code; (c) the termination of substantially all of Andrea's ongoing business operations relating to the subject to this Agreement as Amended; (d) the liquidation of Andrea, or any sale, assignment, or foreclosure of or upon assets that are necessary for the performance by Andrea of its responsibilities under this Agreement as Amended, or (e) the transfer of a majority of Andrea's stock or substantially all of its assets to a competitor of ADI, including but not limited to [*******]. Except as modified by this Amendment, all other terms and conditions of the Agreement shall remain unchanged and in full force and effect. Once signed, any reproduction by reliable means (for example, photocopy or facsimile) is an original unless prohibited by law. IN WITNESS WHEREOF, the Parties hereto have executed this Amendment #1 as of the date first written above. ANDREA ELECTRONICS CORPORATION ANALOG DEVICES, INC. By:/s/ Christopher P. Sauvigne By: /s/ John Croteau - --------------------------------------------- ----------------------- Name: Christopher P. Sauvigne Name: John Croteau ---------------------- Title: President and Chief Executive Officer Title: Product Line Director --------------------- 12 MASTER PREFERRED ESCROW AGREEMENT Master Number 0114100 This agreement "Agreement" is effective May 28, 2002 among DSI Technology Escrow Services, Inc. ("DSI"), Andrea Electronics Corporation ("Depositor") and any additional party signing the Acceptance Form attached to this Agreement ("Preferred Beneficiary"), who collectively may be referred to in this Agreement as the parties ("Parties"). A. Depositor and Preferred Beneficiary have entered or will enter into a license agreement, development agreement, and/or other agreement regarding certain proprietary technology of Depositor (referred to in this Agreement as "the License Agreement"). B. Depositor desires to avoid disclosure of its proprietary technology except under certain limited circumstances. C. The availability of the proprietary technology of Depositor is critical to Preferred Beneficiary in the conduct of its business and, therefore, Preferred Beneficiary needs access to the proprietary technology under certain limited circumstances. D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI to provide for the retention, administration and controlled access of certain proprietary technology materials of Depositor. E. The parties desire this Agreement to be supplementary to the License Agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n). ARTICLE 1 -- DEPOSITS 1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the -------------------------- parties, including the signing of the Acceptance Form, and Exhibit D naming the Deposit Account, Depositor shall deliver to DSI the proprietary technology and other materials ("Deposit Materials") required to be deposited by the License Agreement or, if the License Agreement does not identify the materials to be deposited with DSI, then such materials will be identified on Exhibit A. If Exhibit A is applicable, it is to be prepared and signed by Depositor and Preferred Beneficiary. DSI shall have no obligation with respect to the preparation, signing or delivery of Exhibit A. 1.2 Identification of Tangible Media. Prior to the delivery of the Deposit -------------------------------- Materials to DSI, Depositor shall conspicuously label for identification each document, magnetic tape, disk, or other tangible media upon which the Deposit Materials are written or stored. Additionally, Depositor shall complete Exhibit B to this Agreement by listing each such tangible media by the item label description, the type of media and the quantity. Exhibit B shall be signed by Depositor and delivered to DSI with the Deposit Materials. Unless and until Depositor makes the initial deposit with DSI, 13 DSI shall have no obligation with respect to this Agreement, except the obligation to notify the parties regarding the status of the account as required in Section 2.2 below. 1.3. Escrow Account Name Identification. Subject to this Article 1, and at the ----------------------------------- time Depositor makes the initial deposit with DSI in accordance with Section 1.2 above, Depositor shall complete and sign Exhibit D naming the initial account upon which the Deposit Materials are written or stored. Any new deposits referencing new account names made subsequent to the signing of this Agreement, intended by the Depositor to be held in a separate account and maintained separately from the initial account, but made a part of this Agreement, shall be provided for by the Depositor on Exhibit E, and Exhibit E shall be signed by the Depositor and DSI. 1.4 Deposit Inspection. When DSI receives the Deposit Materials and Exhibit B, ------------------- DSI will conduct a deposit inspection by visually matching the labeling of the tangible media containing the Deposit Materials to the item descriptions and quantity listed on Exhibit B. In addition to the deposit inspection, Preferred Beneficiary may elect to cause a verification of the Deposit Materials in accordance with Section 1.7 below. 1.5 Acceptance of Deposit. At completion of the deposit inspection, if DSI ---------------------- determines that the labeling of the tangible media matches the item descriptions and quantity on Exhibit B, DSI will date and sign Exhibit B and mail a copy thereof to Depositor and Preferred Beneficiary. If DSI determines that the labeling does not match the item descriptions or quantity on Exhibit B, DSI will (a) note the discrepancies in writing on Exhibit B; (b) date and sign Exhibit B with the exceptions noted; and (c) mail a copy of Exhibit B to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs upon the signing of Exhibit B by DSI. Delivery of the signed Exhibit B to Preferred Beneficiary is Preferred Beneficiary's notice that the Deposit Materials have been received and accepted by DSI. 1.6 Depositor's Representations. Depositor represents as follows: --------------------------- a. Depositor lawfully possesses all of the Deposit Materials deposited with DSI; b. With respect to all of the Deposit Materials, Depositor has the right and authority to grant to DSI and Preferred Beneficiary the rights as provided in this Agreement; c. The Deposit Materials are not subject to any lien or other encumbrance that would prohibit, limit, or alter the rights and obligations of DSI under this Agreement; d. The Deposit Materials consist of the proprietary technology and other materials identified either in the License Agreement or Exhibit A, as the case may be; and e. The Deposit Materials are readable and useable in their current form or, if any portion of the Deposit Materials is encrypted, the decryption tools and decryption keys have also been deposited. 14 1.7 Verification. Preferred Beneficiary shall have the right, at Preferred ------------ Beneficiary's expense, to cause a verification of any Deposit Materials. Preferred Beneficiary shall notify Depositor and DSI of Preferred Beneficiary's request for verification. Depositor shall have the right to be present at the verification. A verification determines, in different levels of detail, the accuracy, completeness, sufficiency and quality of the Deposit Materials. If a verification is elected after the Deposit Materials have been delivered to DSI, then only DSI, or at DSI's election an independent person or company selected and supervised by DSI, may perform the verification. 1.8 Deposit Updates. Unless otherwise provided by the License Agreement, --------------- Depositor shall update the Deposit Materials within 60 days of each release of a new version of the product which is subject to the License Agreement. Such updates will be added to the existing deposit. All deposit updates shall be listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor. Each Exhibit B will be held and maintained separately within the escrow account. An independent record will be created which will document the activity for each Exhibit B. The processing of all deposit updates shall be in accordance with Sections 1.2 through 1.6 above. All references in this Agreement to the Deposit Materials shall include the initial Deposit Materials and any updates. 1.9 Removal of Deposit Materials. The Deposit Materials may be removed and/or ---------------------------- exchanged only on written instructions signed by Depositor and Preferred Beneficiary, or as otherwise provided in this Agreement. Notwithstanding the forgoing, Depositor may remove the Deposit Materials without written instructions signed by the Preferred Beneficiary in the event of the termination of the License Agreement by reason of a material breach on the part of the Preferred Beneficiary, upon DSI's receipt of written instructions referencing this section and specifying the License Agreement has terminated due to a material breach on the part of the Preferred Beneficiary. ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING 2.1 Confidentiality. DSI shall maintain the Deposit Materials in a secure, --------------- environmentally safe, locked facility which is accessible only to authorized representatives of DSI. DSI shall have the obligation to reasonably protect the confidentiality of the Deposit Materials. Except as provided in this Agreement, DSI shall not disclose, transfer, make available, or use the Deposit Materials. DSI shall not disclose the content of this Agreement to any third party. If DSI receives a subpoena or any other order from a court or other judicial tribunal pertaining to the disclosure or release of the Deposit Materials, DSI will immediately notify the parties to this Agreement unless prohibited by law. It shall be the responsibility of Depositor and/or Preferred Beneficiary to challenge any such order; however, that DSI does not waive its rights to present its position with respect to any such order. DSI will not be required to disobey any order from a court or other judicial tribunal. (See Section 7.5 below for notices of requested orders.) 2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a -------------- report profiling the account history at least semi-annually. DSI may provide copies of the account history pertaining to this Agreement upon the request of any party to this Agreement. 15 2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred ------------ Beneficiary shall each have the right to inspect the written records of DSI pertaining to this Agreement. Any inspection shall be held during normal business hours and following reasonable prior notice. ARTICLE 3 -- GRANT OF RIGHTS TO DSI 3.1 Title to Media. Depositor hereby transfers to DSI the title to the media -------------- upon which the proprietary technology and materials are written or stored. However, this transfer does not include the ownership of the proprietary technology and materials contained on the media such as any copyright, trade secret, patent or other intellectual property rights. 3.2 Right to Make Copies. DSI shall have the right to make copies of the -------------------- Deposit materials as reasonably necessary to perform this Agreement. DSI shall copy all copyright, nondisclosure, and other proprietary notices and titles contained on the Deposit Materials onto any copies made by DSI. With all Deposit Materials submitted to DSI, Depositor shall provide any and all instructions as may be necessary to duplicate the Deposit Materials including but not limited to the hardware and/or software needed. 3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to ------------------------------ transfer Deposit Materials to Preferred Beneficiary upon any release of the Deposit Materials for use by Preferred Beneficiary in accordance with Section 4.5. Except upon such a release or as otherwise provided in this Agreement, DSI shall not transfer the Deposit Materials. ARTICLE 4 -- RELEASE OF DEPOSIT 4.1 Release Conditions. As used in this Agreement, "Release Condition" shall ------------------ mean any of the conditions for release set forth in the License Agreement. 4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a ------------------ Release Condition has occurred, Preferred Beneficiary may provide to DSI written notice of the occurrence of the Release Condition and a request for the release of the Deposit Materials. Upon receipt of such notice, DSI shall provide a copy of the notice to Depositor by commercial express mail. 4.3 Contrary Instructions. From the date DSI mails the notice requesting --------------------- release of the Deposit Materials, Depositor shall have ten business days to deliver to DSI contrary instructions ("Contrary Instructions"). Contrary Instructions shall mean the written representation by Depositor that a Release Condition has not occurred or has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to Preferred Beneficiary by commercial express mail. Additionally, DSI shall notify both Depositor and Preferred Beneficiary that there is a dispute to be resolved pursuant to the Section 7.3. Subject to Section 5.2 of this Agreement, DSI will continue to store the Deposit Materials without release pending (a) joint instructions from Depositor and Preferred Beneficiary; (b) dispute resolution pursuant to Section 7.3; or (c) order of a court. 16 4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the ------------------ Depositor, DSI is authorized to release the Deposit Materials to the Preferred Beneficiary or, if more than one beneficiary is registered to the deposit, to release a copy of the Deposit Materials to the Preferred Beneficiary. However, DSI is entitled to receive any fees due DSI before making the release. Any copying expense in excess of $300 will be chargeable to Preferred Beneficiary. Upon any such release, the escrow arrangement will terminate as it relates to the Depositor and Preferred Beneficiary involved in the release. 4.5 Right to Use Following Release. Unless otherwise provided in the License ------------------------------ Agreement, upon release of the Deposit Materials in accordance with this Article 4, Preferred Beneficiary shall have the right to use the Deposit Materials for the sole purpose of continuing the benefits afforded to Preferred Beneficiary by the License Agreement. Preferred Beneficiary shall be obligated to maintain the confidentiality of the released Deposit Materials. ARTICLE 5 -- TERM AND TERMINATION 5.1 Term of Agreement. The initial term of this Agreement is for a period of ----------------- one year. Thereafter, this Agreement shall automatically renew from year-to-year unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing that the Agreement is terminated; (b) Preferred Beneficiary instructs DSI in writing that the Agreement is terminated as it relates to Preferred Beneficiary; or (c) DSI instructs Depositor and Preferred Beneficiary in writing that the Agreement is terminated for nonpayment in accordance with Section 5.2 or by resignation in accordance with Section 5.3. If the Acceptance Form has been signed at a date later than this Agreement, the initial term of the Acceptance Form will be for one year with subsequent terms to be adjusted to match the anniversary date of this Agreement. If the deposit materials are subject to another escrow agreement with DSI, DSI reserves the right, after the initial one year term, to adjust the anniversary date of this Agreement to match the then prevailing anniversary date of such other escrow arrangements. 5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to -------------------------- DSI, DSI shall provide written notice of delinquency to the parties to this Agreement affected by such delinquency. Any such party shall have the right to make the payment to DSI to cure the default. If the past due payment is not received in full by DSI within one month of the date of such notice, then at any time thereafter DSI shall have the right to terminate this Agreement to the extent it relates to the delinquent party by sending written notice of termination to such affected parties. DSI shall have no obligation to take any action under this Agreement so long as any payment due to DSI remains unpaid. 5.3 Termination by Resignation. DSI reserves the right to terminate this -------------------------- Agreement, for any reason, by providing Depositor and Preferred Beneficiary with 60-days' written notice of its intent to terminate this Agreement. Within the 60-day period, the Depositor and Preferred Beneficiary may provide DSI with joint written instructions authorizing DSI to forward the Deposit Materials to another escrow company and/or agent or other designated recipient. If DSI does not receive said 17 joint written instructions within 60 days of the date of DSI's written termination notice, then DSI shall destroy, return or otherwise deliver the Deposit Materials in accordance with Section 5.4. 5.4 Disposition of Deposit Materials Upon Termination. Subject to the foregoing ------------------------------------------------- termination provisions, and upon termination of this Agreement, DSI shall destroy, return, or otherwise deliver the Deposit Materials in accordance with Depositor's instructions. If there are no instructions, DSI may, at its sole discretion, destroy the Deposit Materials or return them to Depositor. DSI shall have no obligation to destroy or return the Deposit Materials if the Deposit Materials are subject to another escrow agreement with DSI or have been released to the Preferred Beneficiary in accordance with Section 4.4. 5.5 Survival of Terms Following Termination. Upon termination of this ------------------------------------------ Agreement, the following provisions of this Agreement shall survive: a. Depositor's Representations (Section 1.5); b. The obligations of confidentiality with respect to the Deposit Materials; c. The rights granted in the sections entitled Right to Transfer Upon Release (Section 3.3) and Right to Use Following Release (Section 4.5), if a release of the Deposit Materials has occurred prior to termination; d. The obligation to pay DSI any fees and expenses due; e. The provisions of Article 7; and f. Any provisions in this Agreement which specifically state they survive the termination of this Agreement. ARTICLE 6 -- DSI'S FEES 6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses ------------ applicable to the services provided. DSI shall notify the party responsible for payment of DSI's fees at least 60 days prior to any increase in fees. For any service not listed on DSI's standard fee schedule, DSI will provide a quote prior to rendering the service, if requested. 6.2 Payment Terms. DSI shall not be required to perform any service unless the ------------- payment for such service and any outstanding balances owed to DSI are paid in full. Fees are due upon receipt of a signed contract or receipt of the Deposit Materials whichever is earliest. If invoiced fees are not paid, DSI may terminate this Agreement in accordance with Section 5.2. 18 ARTICLE 7 -- LIABILITY AND DISPUTES 7.1 Right to Rely on Instructions. DSI may act in reliance upon any ---------------------------------- instruction, instrument, or signature reasonably believed by DSI to be genuine. DSI may assume that any employee of a party to this Agreement who gives any written notice, request, or instruction has the authority to do so. DSI will not be required to inquire into the truth or evaluate the merit of any statement or representation contained in any notice or document. DSI shall not be responsible for failure to act as a result of causes beyond the reasonable control of DSI. 7.2 Indemnification. Depositor and Preferred Beneficiary each agree to --------------- indemnify, defend and hold harmless DSI from any and all claims, actions, damages, arbitration fees and expenses, costs, attorney's fees and other liabilities ("Liabilities") incurred by DSI relating in any way to this escrow arrangement unless such Liabilities were caused solely by the negligence or willful misconduct of DSI. 7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement ------------------ shall be resolved by arbitration under the Commercial Rules of the American Arbitration Association. Three arbitrators shall be selected. The Depositor and Preferred Beneficiary shall each select one arbitrator and the two chosen arbitrators shall select the third arbitrator, or failing agreement on the selection of the third arbitrator, the American Arbitration Association shall select the third arbitrator. However, if DSI is a party to the arbitration, DSI shall select the third arbitrator. Unless otherwise agreed by Depositor and Preferred Beneficiary, arbitration will take place in New York, New York, USA. Any court having jurisdiction over the matter may enter judgment on the award of the arbitrator(s). Service of a petition to confirm the arbitration award may be made by First Class mail or by commercial express mail, to the attorney for the party or, if unrepresented, to the party at the last known business address. 7.4 Controlling Law. This Agreement is to be governed and construed in ---------------- accordance with the laws of the State of New York, without regard to its conflict of law provisions. 7.5 Notice of Requested Order. If any party intends to obtain an order from the ------------------------- arbitrator or any court of competent jurisdiction which may direct DSI to take, or refrain from taking any action, that party shall: a. Give DSI at least two business days' prior notice of the hearing; b. Include in any such order that, as a precondition to DSI's obligation, DSI be paid in full for any past due fees and be paid for the reasonable value of the services to be rendered pursuant to such order; and c. Ensure that DSI not be required to deliver the original (as opposed to a copy) of the Deposit Materials if DSI may need to retain the original in its possession to fulfill any of its other escrow duties. 19 ARTICLE 8 -- GENERAL PROVISIONS 8.1 Entire Agreement. This Agreement, which includes the Acceptance Form and ---------------- Exhibits A, B, C, D and E described herein, embodies the entire understanding among all of the parties with respect to its subject matter and supersedes all previous communications, representations or understandings, either oral or written. DSI is not a party to the License Agreement between Depositor and Preferred Beneficiary and has no knowledge of any of the terms or provisions of any such License Agreement. DSI's only obligations to Depositor or Preferred Beneficiary are as set forth in this Agreement. No amendment or modification of this Agreement shall be valid or binding unless signed by all the parties hereto, except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by Preferred Beneficiary, Exhibit C need not be signed by any party, Exhibit D need not be signed by Preferred Beneficiary or DSI and the Acceptance Form need only be signed by the parties identified therein. 8.2 Notices. All notices, invoices, payments, deposits and other documents and ------- communications shall be given to the parties at the addresses specified in the attached Exhibit C and Acceptance Form. It shall be the responsibility of the parties to notify each other as provided in this Section in the event of a change of address. The parties shall have the right to rely on the last known address of the other parties. Unless otherwise provided in this Agreement, all documents and communications may be delivered by First Class mail. 8.3 Severability. In the event any provision of this Agreement is found to be ------------ invalid, voidable or unenforceable, the parties agree that unless it materially affects the entire intent and purpose of this Agreement, such invalidity, voidability or unenforceability shall affect neither the validity of this Agreement nor the remaining provisions herein, and the provision in question shall be deemed to be replaced with a valid and enforceable provision most closely reflecting the intent and purpose of the original provision. 8.4 Successors. This Agreement shall be binding upon and shall inure to the ---------- benefit of the successors and assigns of the parties. However, DSI shall have no obligation in performing this Agreement to recognize any successor or assign of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and conclusive written evidence of the change of parties. 8.5 Regulations. Depositor and Preferred Beneficiary are responsible for and ----------- warrant compliance with all applicable laws, rules and regulations, including but not limited to customs laws, import, export, and re-export laws and government regulations of any country from or to which the Deposit Materials may be delivered in accordance with the provisions of this Agreement. 20 Andrea Electronics Corporation DSI Technology Escrow Services, Inc. - ------------------------------ Depositor By: /s/ Christopher P. Sauvigne By: /s/ Jerry Limbery --------------------------- ----------------- Name: Christopher P. Sauvigne Name: Jerry Limbery Title: President and Chief Financial Title: Sr. Contract Administrator Officer Date: May 7, 2002 Date: May 28, 2002 21 EXHIBIT A MATERIALS TO BE DEPOSITED Account Number 011410 Depositor represents to Preferred Beneficiary that Deposit Materials delivered to DSI shall consist of the following: - ----------------------------------- ------------------------------------- Depositor Preferred Beneficiary By: By: --------------------------------- ---------------------------------- Name: Name: ------------------------------- -------------------------------- Title: Title: ------------------------------ ------------------------------- Date: Date: ------------------------------- -------------------------------- 22 EXHIBIT B DESCRIPTION OF DEPOSIT MATERIALS Depositor Company Name --------------------------------------------------------- Account Number ----------------------------------------------------------------- Product Name Version ----------------------------------------- ----------------- (PRODUCT NAME WILL APPEAR AS EXHIBIT B NAME ON ACCOUNT HISTORY REPORT) DEPOSIT MATERIAL DESCRIPTION: QUANTITY MEDIA TYPE & SIZE LABEL DESCRIPTION OF EACH SEPARATE ITEM Disk 3.5" or - ------ ---- DAT tape mm - ------ ---- CD-ROM - ------ Data cartridge tape - ------ ---- TK 70 or tape - ------ ---- Magnetic tape - ------ ---- Documentation - ------ Other - ------ ---------------------- PRODUCT DESCRIPTION: Environment -------------------------------------------------------------------- DEPOSIT MATERIAL INFORMATION: Is the media or are any of the files encrypted? Yes / No If yes, please include any passwords and the decryption tools. Encryption tool name Version ----------------------------------- ---------------- Hardware required -------------------------------------------------------------- Software required -------------------------------------------------------------- Other required information ------------------------------------------------------ I certify for DEPOSITOR that the above DSI has inspected and accepted the described Deposit Materials have been above materials (ANY EXCEPTIONS ARE transmitted to DSI: NOTED ABOVE): Signature Signature ------------------------ ---------------------------- Print Name Print Name ----------------------- --------------------------- Date Date Accepted ----------------------------- ------------------------ Exhibit B# ---------------------------- Send materials to: DSI, 9265 Sky Park Court, Suite 202, San Diego, CA 92123 (858) 499-1600 23 EXHIBIT C DESIGNATED CONTACT Master Number 0114100
Notices and communications should be addressed to: Invoices should be addressed to: Company Name: Andrea Electronics Corporation Andrea Electronics Corporation Address: 45 Melville Park Road 45 Melville Park Road Melville, New York 11747 Melville, New York 11747 Designated Contact: Thomas W. McClay Contact: Ms. Vicki Tursi Telephone: (631) 719-1898 ________________________________ Facsimile: (631) 719-1824 ________________________________ E-Mail: tmcclay@andreaelectronics.com P.O.#, if required: ____________ Verification Contact: Richard A. Maue
Requests to change the designated contact should be given in writing by the designated contact or an authorized employee.
Contracts, Deposit Materials and notices Invoice inquiries and fee remittances to DSI should be addressed to: to DSI should be addressed to: DSI Technology Escrow Services, Inc. DSI Technology Escrow Services, Inc. Contract Administration PO Box 45156 9265 Sky Park Court, Suite 202 San Francisco, CA 94145-0156 San Diego, CA 92123 Telephone: (858) 499-1600 (858) 499-1636 Facsimile: (858) 694-1919 (858) 449-1637 E-Mail: ca@dsiescrow.com ---------------- Date: May 7, 2002
24 EXHIBIT D NAME OF INITIAL ACCOUNT Account Number 0114100 ("Depositor") has entered into a Master Preferred - ------------------------------- Escrow Agreement with DSI Technology Escrow Services, Inc. ("DSI"). Pursuant to that Agreement, Depositor may deposit certain Deposit Materials with DSI. The initial account will be referenced by the following name: . - ------------------------------------------------- - ----------------------------------- Depositor By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Date: ------------------------------- 25 EXHIBIT E ADDITIONAL ESCROW ACCOUNT TO MASTER PREFERRED ESCROW AGREEMENT Master Number 0114100 New Account Number ______________________ ("Depositor") has entered into a Master - ------------------------------- Preferred Escrow Agreement with DSI Technology Escrow Services, Inc. ("DSI"). Pursuant to that Agreement, Depositor may deposit certain Deposit Materials with DSI. Depositor desires that new Deposit Materials be held in a separate account and be maintained separately from the initial account. By execution of this Exhibit E, DSI will establish a separate account for the new Deposit Materials. The new account will be referenced by the following name: . - ------------------------------------- Depositor hereby agrees that all terms and conditions of the existing Master Preferred Escrow Agreement previously entered into by Depositor and DSI will govern this account. The termination or expiration of any other account of Depositor will not affect this account. DSI Technology Escrow Services, Inc. - ------------------------------------ Depositor By: By: --------------------------------- ------------------------------------ Name: Name: ------------------------------- ---------------------------------- Title: Title: ------------------------------ --------------------------------- Date: Date: ------------------------------- ----------------------------------- 26 PREFERRED BENEFICIARY ACCEPTANCE FORM Account Number 0114100 Depositor, Preferred Beneficiary and DSI Technology Escrow Services, Inc. ("DSI"), hereby acknowledge that is the ---------------------------------- Preferred Beneficiary referred to in the Master Preferred Escrow Agreement effective , 20 with DSI as the escrow agent and ---------- ----- as the Depositor. Preferred Beneficiary hereby - --------------------------- agrees to be bound by all provisions of such Agreement. Depositor hereby enrolls Preferred Beneficiary to the following account(s):
Account Name Account Number - ------------ -------------- - ---------------------------------- -------------------------------------- - ---------------------------------- -------------------------------------- - ---------------------------------- -------------------------------------- Notices and communications to Preferred Beneficiary should be addressed to: Invoices should be addressed to: Company Name: ---------------------------------------- ------------------------------------------- Address: --------------------------------------------- ------------------------------------------- - ----------------------------------------------------- ------------------------------------------- Designated Contact: Contact: ---------------------------------- ---------------------------------- Telephone: ------------------------------------------- ------------------------------------------- Facsimile: P.O.#, if required: ------------------------------------------- ----------------------- E-Mail: --------------------------------------------- - ----------------------------------------------------- ------------------------------------------- Preferred Beneficiary Depositor By: By: ------------------------------------------------- ---------------------------------------- Name: Name ------------------------------------------------ --------------------------------------- Title: Title ----------------------------------------------- -------------------------------------- Date: Date: ------------------------------------------------ -------------------------------------- DSI Technology Escrow Services, Inc. - ------------------------------------ By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Date: ----------------------------------
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