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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 28, 1999
CopyTele, Inc.
(Exact Name of Registrants as Specified in their Charters)
Delaware
(State or Other Jurisdiction of Incorporation)
File No. 0-11254 11-2622630
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
900 Walt Whitman Road, Huntington Station, NY 11746
(Address of Principal Executive Offices) (Zip Code)
(516)-549-5900
(Registrants' Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
On July 28, 1999, CopyTele, Inc. issued a Press Release announcing that it has
entered into a second agreement with Harris Corporation (the "Agreement")
relating to the USS-900, a unique, compact and portable hardware based
high-grade digital encryption device. The Press Release and the Agreement are
filed as Exhibits to this Report and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
10.1. Agreement, dated July 28, 1999, between CopyTele, Inc.
and Harris Corporation, RF Communications
99.1. Press Release, dated July 28, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
CopyTele, Inc.
By: /s/ DENIS A. KRUSOS
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Date: July 28, 1999 Name: Denis A. Krusos
Title:Chairman of the Board
and Chief Executive Officer
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COPYTELE, INC.
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FORM 8-K
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CURRENT REPORT
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Exhibit Index
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Exhibit No. Description
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10.1. Agreement, dated July 28, 1999, between CopyTele, Inc.
and Harris Corporation, RF Communications
99.1. Press Release, dated July 28, 1999
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Exhibit 10.1. Agreement, dated July 28, 1999, between CopyTele, Inc. and Harris
Corporation, RF Communications
Business Agreement
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CopyTele and Harris RF Communications
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This Business Agreement ("the Agreement") is made this 28th day of July, 1999,
by and between Harris Corporation, RF Communications division, a company duly
formed under the laws of Delaware, having offices at 1680 University Avenue,
Rochester, New York, ("Harris"), and CopyTele, Inc, a corporation duly formed
under the laws of Delaware , having offices at 900 Walt Whitman Road, Huntington
Station, New York, 11746, ("CopyTele").
Recitals
WHEREAS, A Confidentiality Agreement was entered into on August 18, 1998 between
CopyTele and Harris Corporation RF Communications Division (the "Confidentiality
Agreement") to allow the exchange of proprietary information concerning
potential business opportunities for the embedment of the Harris Citadel(TM)
encryption ASIC into a CopyTele product, and,
WHEREAS, CopyTele decided to develop a product under a program name "The Bump"
which was later given a model number "USS-900" that utilizes a customized
variant of the Harris Citadel(TM) ASIC (Citadel(TM) CCX). This stand alone
device is capable of providing security to numerous products within the
telecommunications, facsimile, computer, cellular, internet, and
radioindustries, and,
WHEREAS, The incorporation of Harris' encryption ASIC (Citadel(TM) CCX) allows
for high-grade security capable of serving both domestic and international
markets. Citadel(TM) was developed for and has been approved for export
applications, subject to U.S. export license. By utilizing the customized
Citadel(TM) CCX device, it is an objective that the "USS-900" product will
obtain broad-based exportability and,
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WHEREAS, A Purchase Agreement was entered into between Harris and CopyTele on
March 3, 1999 (the "Purchase Agreement") whereby Harris provided CopyTele with a
number of Citadel(TM CCX ASIC's and technical support under a time and material
basis for the purpose of advancing the "USS-900" product to a prototype
pre-production model. The prototype phase of the "USS-900" development is
complete, and,
WHEREAS, It is Harris and CopyTele's mutual desire, by nature of this agreement,
to enter into a broader business arrangement. CopyTele will remain as the main
developer of the "USS-900" product and will bear full responsibility for the
Design, Manufacture, Product Liability, Product Warranty, Distribution and Sale
of the "USS-900" product. Harris will act as a supplier of the Citadel(TM) CCX
ASIC to CopyTele. Additionally, Harris will have the right to sell the "USS-900"
product.
Now, therefore, in consideration of the mutual promises, covenants, and
conditions set forth below, CopyTele and Harris hereby agree as follows:
1.0 INTERPRETATION
In This Agreement:
1.1 "Harris" means Harris Corporation, RF Communications Division, or its
assignee, successor, or affiliate.
1.2 "CopyTele" means CopyTele Inc. or its successor, or affiliate.
1.3 "Citadel(TM) CCX" means the Harris proprietary customized encryption
ASIC derived from the Harris Citadel(TM) ASIC as defined in Harris'
spec sheet contained as Attachment D.
1.4 "USS-900" means the Harris/CopyTele jointly developed communications
security product that specifically utilizes the Harris Citadel(TM)CCX
to encrypt a communications data stream, including Improvements
thereto made during the term of this Agreement.
1.5 "Improvements" means changes made to the USS-900 by way of Engineering
change notices (ECNs) or the like, and other minor changes made to
enhance the performance or marketability of the product while
maintaining substantially the same functions and features of the
product as of the effective date of this Agreement.
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2.0 SCOPE
2.1 This Agreement is intended to broaden the current relationship of the
parties beyond the existing purchase and sale arrangement. Harris will
provide CopyTele the Citadel(TM) CCX ASIC as described in Attachment A
hereto.
2.2 Any additional technical support or service desired by CopyTele from
Harris shall be as defined in a separate written agreement.
2.3 In consideration for the special Citadel(TM) CCX pricing, CopyTele will
compensate Harris with a portion of the proceeds from sales of the
"USS-900" product as defined in Attachment A hereto. In addition,
CopyTele and Harris will share in certain intellectual property rights
as defined in section 7 herein.
2.4 It is anticipated that CopyTele will work to develop a family of
encryption products that may use technology created from the "USS-900"
product development. Harris may provide CopyTele with support for such
new product developments as defined in a separate written agreement.
3.0 COPYTELE OBLIGATIONS
3.1 CopyTele will continue to be responsible for all aspects of product
development, manufacturing, marketing and sales for the "USS-900"
product, including responsibility for warranty, technical
documentation, after-market support and product liability except as
otherwise provided herein.
3.2 CopyTele will pay to Harris a portion of the proceeds from the sale of
"USS-900" products as more fully described in Attachment A hereto.
3.3 CopyTele hereby grants to Harris those rights described in section 7
herein.
3.4 CopyTele will mark, as mutually agreed upon by the parties, all
"USS-900" products incorporating the Harris supplied Citadel(TM) CCX
with a designation of "Secured by Harris" or equivalent as reasonably
defined by Harris.
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3.5 CopyTele will sell to Harris "USS-900" product as defined in Attachment
A hereto.
4.0 HARRIS OBLIGATIONS
4.1 Harris will supply CopyTele with Citadel(TM) CCX ASIC as defined in
Attachment D and as priced in Attachment A hereto.
4.2 Harris hereby grants to CopyTele those rights described in section 7
herein.
5.0 PAYMENTS
5.1 For the "USS-900" product, CopyTele and Harris will compensate each
other in accordance with Attachment A hereto.
5.2 CopyTele will pay Harris for the Citadel(TM) CCX devices supplied in
accordance with this agreement at the price specified in Attachment A
hereto. Harris will pay CopyTele for the USS-900 products sold to
Harris RF Communications at the price negotiated as outlined in
Attachment A hereto.
5.3 For other encryption products that may be jointly developed in the
future, CopyTele and Harris will compensate each other. Details as to
the nature of the compensation will be handled on a case by case basis
as agreed to by the parties in writing by a separate attachment or
agreement.
5.4 Both CopyTele and Harris agree to prompt payment (net 30 days)
following receipt of product for all sales of the Citadel(TM) CCX and
the "USS-900" product to each other.
6.0 EXCLUSIVITY
6.1 During the Term of this Agreement, neither party will participate with
any other entity in the design, development, or manufacture of a
product functionally equivalent to the "USS-900" unless such other
participation has been mutually agreed upon in writing by the parties
hereto. However, nothing contained herein shall be deemed to restrict
either party from quoting, offering to sell, or selling to others of
standard commercial products or services regularly offered to the
public.
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6.2 CopyTele will not designate any product with the nomenclature "USS-900"
unless it contains a Harris Citadel(TM) CCX encryption chip, and
conforms to the terms of this Agreement.
7.0 INTELLECTUAL PROPERTY
7.1 Any patentable inventions jointly conceived or first reduced to
practice jointly by the parties hereto shall be owned jointly by
CopyTele and Harris, together with the related patents and other
intellectual property rights. Any ownership rights provided for by
this paragraph shall survive the expiration of this agreement. The
parties agree that no joint owned invention or intellectual property
right shall be licensed to, or asserted against, others without the
prior written consent of both parties. Each Party may use the jointly
owned inventions and intellectual property rights with respect to the
USS-900 and any future products jointly developed by the Parties, but
not with respect to future independently developed products, which will
require a separately negotiated license as set forth in Section 7.4.
Any intellectual property, which includes patents, patent applications,
trademarks, copyrights, trade secrets, and any other confidential
technical information developed or previously owned solely by CopyTele
shall remain the sole property of CopyTele. Any intellectual property,
which includes patents, patent applications, trademarks, copyrights,
trade secrets, and any other confidential technical information
developed or previously owned solely by Harris shall remain the sole
property of Harris. The Confidentiality Agreement is hereby revised and
established as Attachment C hereto.
7.2 In consideration of the rights and obligations contained herein,
CopyTele grants to Harris a non-exclusive, royalty free license to use
all CopyTele intellectual property associated with the USS-900 product
solely for the purposes of marketing, promoting, selling, and
maintaining the USS-900, but no other products. This license applies
to any and all patents, hardware and software design, copyrights, trade
secrets, or other intellectual property of CopyTele but does not grant
any right or license to Harris to make or sell any product which is
identical to or is a fully functional equivalent of the "USS-900"
product without mutual written agreement.
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7.3 In consideration of the rights and obligations contained herein, Harris
grants to CopyTele a non-exclusive, royalty free license under the
Harris intellectual property to use the Citadel(TM) CCX chips purchased
pursuant to this Agreement along with the related configuration files
solely to make, have made for its order, use, sell and offer to sell
the "USS-900" product, but no other products.
7.4 Should other encryption products, which are not functionally equivalent
to the USS-900, be independently developed in the future by CopyTele
or Harris that utilize any of the jointly owned inventions or
intellectual property described in Section 7.1, the Parties will
negotiate a separate agreement providing for a non-exclusive license to
the other party with a royalty payment for the intellectual property
used as defined in Attachment B hereto.
7.5 Trademarks: Neither party shall use or publish the others' trade name
or trademark except in association with the marketing, distribution,
advertising or sale of the "USS-900" product. Any such use or
publication shall be in conformance with reasonable usage standards
established by the owner of the mark, which may be modified from time
to time by, and shall have the prior written approval of the owner of
the mark.
8.0 INDEMNIFICATION AND HOLD HARMLESS
8.1 CopyTele agrees to indemnify and hold harmless Harris, its officers,
directors, employees and agents from and against any and all liability,
claims, demands, losses, damages, or expenses, of whatever form or
nature, including attorney's or accountant's fees and other costs of
legal defense, that they or any of them may sustain or incur as a
result of any claims for infringement or misappropriation of any third
party's intellectual property rights arising from the use, sale or
offer for sale of the USS-900; provided, however, that this section
8.1 shall not apply to any liability, claims, demands, losses, damages,
and expenses for which Harris shall indemnify and hold CopyTele
harmless pursuant to section 8.2.
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8.2 Harris agrees to indemnify and hold harmless CopyTele, its officers,
directors, employees and agents from and against any and all liability,
claims, demands, losses, damages, or expenses, of whatever form or
nature, including attorney's or accountant's fees and other costs of
legal defense, that they or any of them may sustain or incur as a
result of any claims for infringement or misappropriation of any third
party's intellectual property rights arising from the use of the
Citadel CCX in the manufacture, sale, offer for sale, use, and
importation of the USS-900; provided, however, that this section 8.2
shall not apply to any liability, claims, demands, losses, damages, and
expenses for which CopyTele shall indemnify and hold Harris harmless
pursuant to section 8.1.
8.3 IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE UNDER THIS AGREEMENT
FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT EVEN IF A PARTY HAS BEEN
ADVISED OR HAS KNOWLEDGE THAT ITS ACTIONS MAY GIVE RISE TO SUCH
DAMAGES.
9.0 CONDITIONS OF PURCHASE AND SALE
9.1 The sale of Citadel(TM) CCX ASIC's by Harris to CopyTele shall be
governed by Harris Corporations standard Terms and Conditions of Sale
with changes as mutually agreed and will be separately negotiated in
good faith with a target of sixty (60) days from the signing of this
agreement.
9.2 The purchase of USS-900 by Harris from CopyTele shall be governed by
Harris Corporations standard terms and conditions of purchase, with
changes as mutually agreed and will be separately negotiated in good
faith with a target of sixty (60) days from the signing of this
agreement.
10.0 PRESS RELEASES
10.1 Neither party shall disclose by press release, or other means, the
existence or content of this agreement or the undertakings described
herein without the expressed written approval of the other party as to
the content and timing of the proposed disclosure, except as required
by law.
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11.0 NOTICES
11.1 Notices and other communications between the parties hereunder shall be
provided in writing either by fax or mailing to the following
individuals and addresses:
Harris: CopyTele:
Rick Mattei Frank Trischetta
1680 University Ave. 200 Summit Lake Drive
Rochester, NY. 14610 Valhalla, NY. 10595
FAX: 716-242-4491 FAX: 914-747-5097
12.0 AUDIT RIGHTS
12.1 Both parties agree to keep accurate records containing the particulars
that may be necessary for the purpose of validating payments to be made
to each other. The records will be retained by each party for a period
of three fiscal years to which they pertain. Each party shall have the
right to retain an independent accountant for the sole purpose of
inspecting and examining such books and records insofar as may be
necessary verify the accuracy of the statements provided to the other
party. Such examination shall be made during normal business hours
with prior reasonable notice and not more than once per calendar year.
The cost of any examination performed under this section shall be paid
by the party requesting the examination.
12.2 In the event of a dispute arising from the results of any audit
performed by either party pursuant to paragraph 12.1, the parties shall
agree on, and share the cost of, an independent, neutral certified
public accountant who shall resolve such dispute.
13.0 TERM AND TERMINATION
13.1 The term of this agreement shall be thirty-six (36) months from the
date of last signature below unless earlier cancelled or terminated in
accordance with the terms of this agreement. At the end of the
thirty-six month period, this Agreement may be extended by written
mutual agreement. In the event of cancellation, expiration or
termination, each party agrees to fulfill its outstanding obligations,
regarding this Agreement, to each other.
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13.2 This agreement may be cancelled at any time by written mutual
agreement.
13.3 This Agreement may be terminated immediately by either party in the
event the other party: becomes insolvent; or becomes subject to a
bankruptcy filing, liquidation, or dissolution proceeding; or ceases or
is ordered to temporarily or permanently cease to do business.
13.4 Either party may terminate this Agreement, effective immediately upon
receipt of notice of default to the other party, in the event that the
other party defaults on the performance or observance of any of the
material terms or conditions of this Agreement, which default is not
remedied within sixty (60) days after the written notice specifying the
nature of the default is received. Upon receipt of the notice of
default, each party shall continue to perform all of its respective
obligations hereunder upon the same terms and conditions as herein set
forth, until termination of this Agreement.
13.5 In the event that CopyTele should, at any time, (a) decide to
discontinue manufacture and/or support the USS-900; or (b)file for
bankruptcy or declare insolvency, then CopyTele shall enter into good
faith negotiations with other manufacturers, as mutually agreed to by
Harris and CopyTele, for the purpose of reaching an agreement with one
or more such manufacturer under which they may become an alternate
source of manufacture and/or supply for the USS-900.If, despite a good
faith effort, CopyTele is unable to reach an agreement with an
alternate manufacturer, then Harris shall have non-exclusive,
royalty-free license to practice under the intellectual property rights
and use the Technology to make, have made, use, and sell the USS-900.
Given either conditions (a) and or (b) as noted above occur, then
CopyTele shall enter into negotiations related to cost & delivery and
make good faith efforts to promptly transfer the most current version
of the USS-900 Technology to Harris. "Technology" in this section means
all information, inventions, know-how, software, listings, source
code, flow diagrams, firmware, documentation, test reports, test data,
schematics and circuit diagrams, which are owned, controlled or
licensed by CopyTele and which are necessary in the manufacture,
testing, installation, maintenance or use of the USS-900.
13.6 In the event of termination of this Agreement for any reasons, Sections
7, 8, and 14 as well as Attachment C shall remain in effect and survive
such termination.
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14.0 REPRESENTATIONS AND WARRANTIES
14.1 Each party hereto acknowledges (i) the risks of its undertakings
hereunder, (ii) the uncertainty of the benefits and obligations
hereunder, and (iii) its assumption of such risks and uncertainty.
Each party has conducted its own due diligence and requested and
reviewed such contracts, business plans, financial documents and any
other written material as in such party's opinion shall be the basis of
said party's decision to enter into this Agreement.
14.2 Each party has consulted such legal, financial, technical or other
experts it deems necessary or desirable before entering into this
transaction. Each party represents and warrants that it has read,
knows, understands and agrees with the terms and conditions of this
transaction. Neither party has relied upon any oral representation of
the other party in entering into this transaction. All discussions,
negotiations, estimates or projections developed by a party during the
course of negotiating the terms and conditions of this transaction are
by way of illustration only, and, unless specifically contained in this
Agreement or one of its Exhibits or Attachments, are not binding or
enforceable against the other party in law or in equity.
14.3 Each party hereto is an independent contractor and nothing herein
contained shall be construed to be inconsistent with this relationship
or status. Neither party owes a fiduciary duty to the other. Nothing
in this Agreement shall be in any way construed to constitute either
party as the agent, employee or representative of the other. As an
independent contractor, each party has relied on its own expertise or
the expertise of its legal, financial, technical or other agents.
15.0 GOVERNING LAW AND JURISDICTION
15.1 This Agreement shall be governed by and be construed in accordance with
the laws of the state of New York. Any disputes arising under this
Agreement shall be resolved by first attempting to settle the matter
through management intervention. Failing that, any disputes that are
not so resolved will be referred to and finally resolved by binding
arbitration in accordance with the rules of the American Arbitration
Association, with the location of the arbitration to be in New York.
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16.0 ASSIGNMENT
16.1 Neither party may assign this Agreement in whole or part without the
prior written consent of the other party, and any assignment contrary
to the terms hereof shall be null and void; provided, however, that
Harris may assign or delegate any of its rights and obligations, in
whole, or in part, to any affiliate of Harris without the written
consent of CopyTele; and CopyTele may subcontract the manufacture of
the "USS-900," in whole or in part, without the consent of Harris and
without releasing Harris or CopyTele from any of their obligations
hereunder.
17.0 ENTIRE AGREEMENT
17.1 This Agreement constitutes the sole, complete and entire agreement
between CopyTele and Harris and supersedes all pervious communications,
transactions, and understandings, whether oral or written, pertaining
to the subject matter hereof. No other additions, alterations,
modifications or waiver of any of the provisions herein shall be valid
unless made in writing and executed by authorized representatives of
CopyTele and Harris.
17.2 Sale of products to each other will be handled by separate purchase
orders consistent with the terms of this Agreement.
IN WITNESS WHEREOF, each of Harris and CopyTele have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
stated above.
COPYTELE HARRIS
By: Denis A. Krusos By: Chris Fedde
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Denis A. Krusos 7/28/99 Chris Fedde 7-28-99
Chairman of the Board Director, Secure Products Group
CopyTele, Inc. Harris Corporation
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Exhibit 99.1 Press Release, dated July 28, 1999
FOR IMMEDIATE RELEASE
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COPYTELE AND HARRIS ENTER
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INTO SECOND AGREEMENT
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Huntington Station, New York, July 28, 1999: CopyTele, Inc. ("CopyTele")
(NASDAQ/NMS: COPY) announced today that it has entered into a second agreement
with Harris Corporation ("Harris") relating to the recently developed USS-900
encryption product. The USS-900 is a unique, compact and portable hardware based
high-grade digital encryption device for telephones, fax machines and computers.
The USS-900 incorporates the Harris Digital Cryptographic chip - the Citadel(TM)
CCX - which provides state-of-the-art protection for domestic and international
users over virtually any communications media.
The initial agreement with Harris in March, 1999, provided for Harris to supply
limited quantities of the Citadel(TM) CCX and technical support in order to
advance the product to a pre-production prototype model. The prototype phase has
now been completed and, as a result, the parties have entered into a three year
agreement. Under the terms of the Agreement, CopyTele will remain responsible
for production, development, manufacturing and marketing of the USS-900 product.
Harris will sell to CopyTele its Citadel(TM) CCX chip at a negotiated price,
based in part on sales of USS-900, and all USS-900 units will be marked or
labeled with the Harris branding of "Secured by Harris". The Agreement also
addresses the potential for future development of a family of encryption
products.
CopyTele currently is utilizing U.S. based manufacturing subcontractors and is
being supplied with portions of subassemblies and parts from its joint venture
company in Shanghai, China, for the current limited production of the USS-900
product. The test marketing phase of the product, which is under way, targets
major U.S. office equipment distributors and government agencies.
The USS-900 provides security to numerous products within the
telecommunications, fax and computer fields and permits secure computer file
encryption for safe storage. The device also incorporates a public key exchange
system that allows for a convenient and simple method for users to establish a
secure connection. The device is compact, portable and has low power
consumption. CopyTele has filed an application for patent protection for the
system on which the USS-900 is based.
For further information on the USS-900, please visit our web site at
www.copytele.com. CopyTele will demonstrate the USS-900 at its Annual Meeting of
Stockholders today.
* * *
Contact: Anne Rotondo
516-549-5900
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
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Certain statements in this Press Release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievement of
CopyTele to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: CopyTele's production
capabilities; long-term product performance and the capability of CopyTele, its
distributors and its dealers to adequately service CopyTele's products; the
ability of CopyTele to obtain all required foreign government approvals;
political and economic stability in targeted marketing territories; the ability
of CopyTele to commercially develop and establish a market for its new products
under development; the possible development of competitive products that could
render CopyTele's products obsolete or unmarketable; and the ability of CopyTele
to obtain additional financing. See "Business" and Note 1 of CopyTele's
Financial Statements contained in the CopyTele Annual Report on Form 10-K for
discussions regarding uncertainties that may significantly affect the results of
operations, future liquidity and capital resources. CopyTele undertakes no
obligation to update any forward-looking statements as a result of new
information, unanticipated events, or otherwise.
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