UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q-SB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Securities and Exchange Commission File Number
000-26369
Dicom Imaging Systems, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0422026
(State or other jurisdiction of (I.R.S. Employer
incorporation-or-organization) Identification Number)
1350 E. Flamingo Road
Suite 847
Las Vegas, NV 89119
(Address of principal executive offices, including zip code)
(877) 624-6243
(Registrant's Telephone Number, Including Area Code)
(520) 441-8755
(Registrant's Facsimile Number, Including Area Code)
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
requirements for the past 90 days.
YES X NO
The number of issued and outstanding shares of the Registrants Common
Stock, $0.001 par value, as of March 31, 2000, was 7,200,000.
DICOM IMAGING SYSTEMS, INC.
PART I-FINANCIAL INFORMATION
Page
To be updated when all pages have been received
Item 1. Financial Statements:
Balance Sheet at March 31, 2000 .........................................4
Condensed Statements of Operations for the three month period
ended March 31, 2000 ....................................................5
Condensed Statements of Stockholder's Deficit for the three month period
ended March 31, 2000 ....................................................5
Condensed Statements of Cash Flows for the three month period
ended March 31, 2000 ....................................................6
Notes to Unaudited Condensed Financial Statements........................7
Item 2. Management's Discussion and Analysis of Financial Condition......8
PART II-OTHER INFORMATION
Item 1. Legal Proceedings ...............................................9
Item 2. Changes in Securities............................................9
Item 3. Defaults Upon Senior Securities..................................9
Item 4. Submission of Matters to a Vote of Security Holders..............9
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K.................................9
Signatures...............................................................10
Exhibit 27.1 Financial Data Schedule.....................................30
Information Required in Quarterly Report
Certain Forward-Looking Information
The information contained in this Quarterly Report includes forward-looking
statements. Since this information is based on current expectations which
involve risks and uncertainties, actual results could differ materially from
those expressed in the forward-looking statements. Part I . Financial
Information Item 1. Financial Statements The following interim unaudited
financial information is qualified in its entirety by reference to Dicom's
audited financial statements and notes contained on its filing with the
Securities and Exchange Commission on Form 10KSB fiscal year ending December
1999.
Dicom Imaging Systems, Inc.
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
As At March 31, 2000
March 31, 2000 December 31, 1999
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 935,639 $ 18,263
Accounts receivable 38,027 48,215
Inventory 30,534 -
Prepaid expenses 32,890 30,468
_________ ______
1,037,090 96,946
Intangible assets 62,852 15,237
Equipment 51,586 46,639
__________ _________
$ 1,151,528 $ 158,822
========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 37,481 $ 56,431
Accrued liabilities 35,294 89,673
______ _______
72,775 146,104
_______ _______
Long-term liabilities:
Deferred revenue 964,103 248,699
_______ _______
Stockholders' deficit:
Authorized:
10,000,000 preferred stock,
$.001 par value
50,000,000 common stock,
$.001 par value
Issued:
21,600,000 common stock
(December 31, 1999 - 7,200,000) 21,600 7,200
Additional paid in capital 929,931 912,815
Deficit (836,881) (1,155,996)
_________ __________
114,650 (235,981)
___________ __________
$ 1,151,528 $ 158,822
============ ==========
Dicom Imaging Systems, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in U.S. dollars)
3 months 3 months 12 months
ended ended ended
31-Mar-00 31-Mar-99 31-Dec-99
(Unaudited) (Unaudited)
Sales $748,228 $ - $249,032
Cost of sales 135,391 - 150,869
________________________________________________
Gross profit 612,837 - 98,163
________________________________________________
Operating expenses:
Depreciation 7,735 - 16,140
General and 130,801 305,934 793,172
administrative
Research and 74,082 - 104,460
development
Selling and marketing 81,104 - 240,387
________________________________________________
293,722 305,934 1,154,159
________________________________________________
Net income (loss) 319,115 (305,934) (1,055,996)
================================================
Net income (loss) per $0.01 ($0.03) ($0.17)
share, basic ____________________________________________________
Net income (loss) per $0.01 ($0.03) ($0.17)
share, diluted ____________________________________________________
Weighted average common 21,600,000 9,000,000 6,150,000
shares outstanding, ____________________________________________________
basic
Weighted average common 33,126,969 9,000,000 6,150,000
shares outstanding,
diluted
Dicom Imaging Systems, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Expressed in U.S. dollars)
As At March 31, 2000
(Unaudited)
Total
Common stock Additional Income stockholders'
Shares Amount paid-in capital (Deficit) equity
_____________________________________________________________________
Balance,
12-31-99 7,200,000 $ 7,200 $ 912,815 $(1,155,996) $ (235,981)
Issuance
of stock
options - - 108,827 - 108,827
Deferred
compensation
of stock
options - - (77,311) - (77,311)
Net income
- - - 319,115 319,115
3:1 Stock 14,400,000 (14,400) 14,400 - -
split ___________________________________________________________________
completed
after quarter-end
Balance,
3-31-00 21,600,000 $ 21,600 $ 929,931 $ (836,881) $ 114,650
====================================================================
Dicom Imaging Systems, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. dollars)
(Unaudited)
3 months ended 3 months ended
March 31, 2000 March 31, 1999
Cash flows from operating
activities:
Net income (loss)
319,115 (305,934)
Items not involving cash:
Shares issued in
exchange for services
- 203,000
Stock based compensation
31,516 -
Depreciation and amortization
7,735 -
Changes in operating assets
and liabilities:
-
Accounts receivable
10,188 -
Stock subscription receivable
- (443,950)
Inventory
(30,534) -
Prepaid expenses
(2,422) -
Accounts payable
(18,950) 7,799
Accrued liabilities
(54,379) -
Deferred revenue
715,404 -
Net cash provided by _______ _________
(used in) operating activities
977,673 (539,085)
Cash flows from financing activities:
Issue of common shares
- 796,901
Share issue costs
- -
Net cash provided by financing
activities __________ _________
- 796,901
Cash flows from investing activities:
Purchase of equipment
(10,297) (34,914)
Purchase of trademarks
(50,000) -
Net cash used in investing activities ________ ________
(60,297) (34,914)
________ ________
Net increase (decrease)
in cash and cash equivalents
917,376 222,902
Cash and cash equivalents,
beginning of period
18,263 -
_______ _______
Cash and cash equivalents,
end of period $ 935,639 $ 222,902
========= =========
Supplementary information:
Interest paid $ 191 $ -
Non-cash transactions:
Common stock issued for services $ - $ 203,000
Dicom Imaging Systems, Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
Three months ended March 31, 2000
1. Significant accounting policies:
(a) Basis of presentation:
These unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States. The unaudited interim financial statements include all
adjustments, consisting solely of normal recurring adjustments, which in
management's opinion are necessary for a fair presentation of the financial
results for the interim periods. The financial statements include the accounts
of the Company's wholly owned subsidiary, 527403 B.C. Limited. All significant
intercompany balances and transactions have been eliminated in the unaudited
consolidated financial statements. The financial statements have been prepared
on a basis consistent with the annual financial statements of the Company and
should be read in conjunction therewith.
(b) Use of estimates:
The preparation of the unaudited consolidated financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and recognized revenues and expenses for the
reporting periods. In these unaudited consolidated financial statements, the
significant areas requiring the use of estimates include the valuation of
long-lived assets, including intangible assets, the fair value of stock options
and the recognition of revenue. Actual results may significantly differ from
these estimates.
(c) Revenue recognition:
The Company generates revenues through three sources: hardware sales,
software license revenues and services revenues. Hardware revenues are
recognized when goods are shipped and title passes. Software license revenues
are normally generated from licensing the perpetual right to use the Company's
products directly to end-users and indirectly through resellers. The Company
recognizes as revenue only the fee payable from the reseller, net of any
discount. Service revenues are generated from telephone support services.
Revenues from software license agreements are recognized upon delivery of
software if persuasive evidence of an arrangement exists, collection is
probable, the fee is fixed or determinable, and vendor-specific objective
evidence exists to allocate the total fee to elements of the arrangement.
Vendor-specific objective evidence is typically based on the price charged when
an element is sold separately, or, in the case of an element not yet sold
separately, the price established by authorized management, if it is probable
that the price, once established, will not change before market introduction.
Elements included in multiple element arrangements could consist of software
products, upgrades, enhancements or customer support services. The Company's
agreements with its customers and resellers do not contain product return
rights.
Service revenues are recognized ratably over the term of the contract,
typically one year. If a transaction includes both license and service elements,
license fee revenues are recognized on shipment of the software, provided
services do not include significant customization or modification of the base
product, and the payment terms for licenses are not subject to acceptance
criteria. Revenues that have been prepaid or invoiced but do not yet qualify for
recognition under that Company's policies are reflected as deferred revenues.
(d) Inventories
Inventories are stated at the lower of cost, on a first-in, first-out basis,
and net realizable value.
2. Earnings per share:
The weighted average number of common shares outstanding basic and diluted
gives retroactive effect to the 3 for 1 stock split which occurred on
April 5, 2000 for all shareholders as of record on March 31, 2000.
Item 2.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS FOR THE MONTHS
ENDING MARCH 31, 2000
REVENUES
Revenues for the three months ended March 31, 2000 were $748,228. $500,000
of this revenue was recorded as deferred revenue at December 31, 1999 and was
derived from the termination of the agreement with Mr. Doug Campbell that
resulted in a settlement, whereby the Company fulfilled all of its obligations
by delivering to him 650 copies of the software license. The remaining $248,228
was derived primarily from the sale of hardware and software licenses directly
to dentists in the United States, compared to revenues of $249,032 for the year
ended December 31, 1999. All of our revenues were paid in US currency.
The company has recorded deferred revenue as at March 31, 2000 in the
amount of $964,103. This represents monies received in exchange for issuing
exclusive three and four-year contracts to distributors in the United Kingdom,
as well as Spain, Brazil, Mexico, Portugal (the Spanish deal), and Australia.
This deferred revenue will be recognized ratably over the term of the contract
(3 to 4 years). These contracts also provide the company with a royalty based on
sales by these distributors. .
GROSS MARGIN
Cost of sales for the quarter ended March 31, 2000 were $135,391, leaving a
Gross Margin of $612,837, which equates to 82% of sales. 47% of this gross
margin relates to the sales of hardware and software licenses directly to
dentists, compared to a 39% gross margin for the period ended December 31, 1999.
The reason for the increase in gross margin relates to efficiencies in software
burning costs realized by higher purchasing volumes. Cost of sales included
software burning and hardware costs, freight costs and credit card transaction
charges, as well as support related salaries and telephone charges.
OPERATING EXPENSES
Operating expenses for the three months ended March 31, 2000 included:
- - - - - - - Depreciation and amortization in the amount of $7,735, primarily on computer
and camera equipment used for demonstration purposes at tradeshows.
- General and administrative costs in the amount of $130,801. General and
administrative costs include administrative salaries, audit and legal charges,
investor relations charges, rent, insurance costs and office expenses. The
general and administrative costs for the 3 months ended March 31, 1999 were
$305,934 and consisted entirely of non-recurring start-up expenses.
- Research and development costs in the amount of $74,082 for software
development. We expect our research and development costs to increase in the
next months as we complete the development of the Xray and LabRX modules.
- Selling and marketing costs of $81,104 compared to $240,387 for the year
ended December 31, 1999. Selling and marketing costs includes trade show costs,
advertising, mailings, and web site maintenance. These costs have increased in
order to effect higher sales volumes.
The resulting net income for the three months ended March 31, 2000 was
$319,115, which equates to a fully diluted net income per share, after
accounting for the April 6, 2000 stock split, of $.01 per share, reducing the
accumulated deficit to $836,881.
The operations for the three months ended March 31, 2000 were funded
primarily from the cash generated from operating activities, including the
monies received for the license agreements with the United Kingdom and for the
"Spanish deal".
We have implemented a stock option plan. The plan is an essential tool to
attract and retain the qualified personnel needed to implement our business
strategy. At March 31, 2000, we have granted 11,883,000 options (after
accounting for the April 6, 2000 stock split). While no options have been
exercised as yet, we recorded a non-cash charge to the income statement for the
three months ended March 31, 2000 of $31,516, and deferred compensation expense
of $77,311 relating to the issuance of these options.
Improvement in Financial Condition
In the three months ended March 31, 2000, total assets increased from
$158,822 at December 31, 1999 to $1,151,528 at March 31,2000. This is due
primarily to the increase in cash balances resulting from monies received from
license agreements. These monies were recorded as deferred revenue and will be
recognized ratably over the term of the license agreements (3 to 4 years).
Net income for the three months ended March 31, 2000 was $319,115, reducing
the deficit accumulated during the development stage from 1,155,996 to 836,881,
and increasing earnings per share to $.01 from the loss per share shown at
December 31, 1999 of $.17.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
In March of 2000, Dicom had entered into a Software Agreement with CLG
Investments Limited ("Software Agreement") whereby CLG would pay a License Fee
of $2,250,000 for a license to certain Dicom software. CLG is granted the
exclusive right to distribute copies of Dicom's imageEXPLORER, imageEDITOR,
Whitener and Simulator ("Licensed Products") dental imaging software ("License")
within the territories of Mexico, Brazil, Spain and Portugal ("Territory"). The
License shall extend to any other dental imaging software products developed by
Dicom, if and when available. $750,000 USD of the License Fee was due upon the
signing of the Agreement. The remaining $1,500,000 USD of the License Fee is due
in two equal installments due by August 1, 2000 and December 20, 2000
respectively. In addition to the License Fee, CLG shall pay Dicom a royalty of
20% of the Gross Receipts of all Licensed products, including service and
support related to any licensed product during the term of the Agreement
("Royalty"). The Minimum Royalty Payment is due on the first, second, and third
anniversaries of the agreement shall be $400,000, $800,000 and $1,600,00
respectively. Each year thereafter upon renewal, at the option of CLG the
minimum payment shall be $1,600,000. No License Fee shall be due for any renewal
period, above and beyond the Minimum Royalty Payment. The term of this Agreement
is for three years, which may be extended by CLG in one year terms thereafter,
provided CLG notifies Dicom of it's intention in writing, ninety days prior to
the expiration date of the original term.
In February of 2000, Dicom had entered into a Software Agreement with Dicom
Imaging UK, a partnership of Great Britain, ("Software Agreement") whereby UK
would pay a License Fee of $300,000 for a license to certain Dicom software. UK
is granted the exclusive right to distribute copies of Dicom's imageEXPLORER,
imageEDITOR, Whitener and Simulator ("Licensed Products") dental imaging
software ("License") within the territories of the United Kingdom, including
Scotland, Wales, England. Northern Ireland and the Republic of Ireland
("Territory"). The License shall extend to any other dental imaging software
products developed by Dicom, if and when available. $150,000 USD of the License
Fee was due upon the signing of the Agreement. The remaining $150,000 USD of the
License Fee is due by December 1, 2000. In addition to the License Fee, UK shall
pay Dicom a royalty of 5% of the Gross Receipts of all Licensed products,
including service and support related to any licensed product during the second
and third years of the Agreement ("Royalty"). The Royalty shall increase to 12%
during the forth year of the Agreement. The Royalty shall not apply to sales
which occur during the first year of this Agreement. The term is for four years,
and may be extended by UK for an additional three year term, provided UK
notifies Dicom of its intention in writing, ninety days prior to the expiration
date of the original term. In the event of a renewal, UK agrees to pay a Renewal
Fee of $345,000 USD. $172,500 USD of the Renewal Fee shall be due immediately
upon commencement of the renewal term. The remainder of the Renewal Fee shall be
due six months from the commencement of the renewal term. In addition to the
renewal fee UK shall pay to Dicom a royalty of 6 % of the Gross Receipts of all
Licensed products, including service and support related to any licensed product
during the second and third years of the Renewal term ("Renewal Royalty") .
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 License Agreement between Registrant and CLG Investments
Limited effective March 2000.
* Exhibit 10.2 To be filed by Amendment
License Agreement between Registrant and Dicom Imaging UK,
a partnership of Great Britain
Exhibit 27.1 Financial Data Schedule
(b) Reports on 8-K
None.
SIGNATURES
Pursuant to the requirements of Section-12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
DICOM IMAGING SYSTEMS, INC.
(Registrant)
Date: May 15, 2000
By: /s/ David Gane
David Gane
President and Chief Executive Officer
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (hereinafter called "Agreement") made this
17th day of March, 2000 by and between DICOM IMAGING SYSTEMS, INC.,
a Nevada corporation (hereinafter called "Dicom", which term shall
include Dicom's subsidiaries), and CLG INVESTMENTS
Limited (CLG).
WITNESSETH:
WHEREAS, Dicom has developed and possesses certain computer technology with
reference to imaging software in dentistry (which together with all future
developments thereof is collectively called "Dicom Dental Software"),
WHEREAS, Dicom has the technology, capability and expertise to develop,
create, design, manufacture, produce and provide certain dental imaging software
technology; and
WHEREAS, CLG is a holding company with a previous financial interest in Dicom
and
WHEREAS, CLG desires to license the exclusive rights to the Dicom Dental
Software in the Territory, as defined herein.
WHEREAS, CLG desires to act as the sole and exclusive distributor of the
Dicom Dental Software for the Territory, with the
right to sublicense within the Territory;
WHEREAS, subject to the conditions and terms contained herein, Dicom is
willing and desirous to grant to CLG, and CLG desires to obtain from Dicom an
exclusive, transferable, assignable license for the distribution, production,
promotion, marketing and sale rights to the Dicom Dental Software for CLG and
only for purposes in the dental market the Territory, which shall consist of
Mexico, Brazil, Spain and Portugal; and
WHEREAS, Dicom and CLG have negotiated and agreed upon the following
conditions and terms for a business relationship for the development,
production, distribution, marketing, license and sale of the Dicom Dental
Software.
NOW, THEREFORE, for and in the consideration of Ten Dollars ($10.00) in
hand paid each respective party to the other and other good/valuable
considerations including, but not limited to, the covenants, conditions and
terms hereof, the sufficiency and receipt of said good/valuable considerations
being herewith acknowledged by the respective parties, Dicom and CLG stipulate
and agree as follows:
1. Recitals. The recitals set forth above are accurate, correct and true
and are incorporated herein by this reference describing specifically the
understandings and intentions of the respective parties hereto.
2. Definitions. When used in this Agreement, the following terms shall have
the meanings set forth next to the same as follows:
(a) The term "Image Explorer" means the Dicom Dental Software component
that is sold under the trademark Image Explorer, but not including any modules,
which may be used in connection with Image Explorer; the term "Modules" refers
to Image Explorer together with the optional modules that Dicom has developed to
work in connection with Image Explorer.
(b) The term "Future Products" means the Dicom Dental Software components,
which are developed during the Term of this agreement in the field of dental
imaging technology by Dicom for sale and licensing.
3. Dicom's Right to Terminate.
(a) Dicom may terminate this Agreement, in addition to any other remedies
available to it, (i) if CLG has failed to perform or meet any material
obligation, condition or term contained herein and failed to remedy the default
within thirty (30) days after the receipt of written notice from Dicom to that
effect, or (ii) if CLG has failed to make any payment when payable and due under
this Agreement to Dicom within fifteen (15) days after the receipt of written
notice from Dicom to that effect.
(b) Notwithstanding the foregoing, this Agreement shall be automatically
terminated if CLG becomes bankrupt, involuntary, voluntary or adjudicated, or
CLG shall cease to function as a going concern by suspending or discontinuing
its business or ceases to distribute, market, license and/or sell Dicom Dental
Software for any reason except for periodic shutdowns in the ordinary course of
business and interruptions caused by strike, labor dispute or any other events
over which it has no control.
(C) Dicom's failure to resort to any remedy for breach hereunder shall not be
deemed to be a waiver for any subsequent breach of this Agreement.
4. CLG's Right to Terminate.
(a) CLG may terminate this Agreement, in addition to any other remedies
available to it if Dicom has failed to perform or meet any material obligation,
condition or term contained herein and failed to remedy the default within
thirty (30) days after the receipt of written notice from CLG to that effect.
(b) Notwithstanding the foregoing, this Agreement shall be automatically
terminated if Dicom becomes bankrupt, involuntary, voluntary or adjudicated, or
at CLG's discretion may terminate if Dicom shall cease to function as a going
concern by suspending or discontinuing its business, ceases supply, development
or support of the Dicom Dental Software except for the decision to discontinue
specific projects and periodic shutdowns in the ordinary course of business and
interruptions caused by strike, labor dispute or any other events over which it
has no control.
(c) CLG's failure to resort to any remedy for breach hereunder shall not be
deemed to be a waiver for any subsequent breach of this Agreement.
5. Grant of License Rights. Subject to the conditions and terms contained
herein, during the Term of this Agreement, Dicom grants to CLG a sole and
exclusive, transferable, assignable license, (with the right to sublicense), to
manufacture, distribute, produce, advertise, market, promote and sell the Dicom
Dental Software in the Territory.
6. Dicom Dental Software. The Dicom Dental Software is a suite of imaging
software for use in the dental professions, which may be improved and updated
from time to time with technological and graphic advancements that incorporate
as a part thereof certain respective features available to the user of the Dicom
Dental Software from time to time. The Dicom Dental Software is based upon a
core Image Explorer product that provides an imaging management system in which
other software products have been and are being developed to provide increased
functionality and features for the Dicom Dental Software.
7. Dicom License Terms. Dicom shall deliver and provide to CLG the Dicom
Dental Software pursuant to the attached delivery schedule, Exhibit B.
Notwithstanding anything herein to the contrary, all proprietary right, title
and interest in and unto the foregoing Dicom Dental Software, including the
extension of those rights in the respective CLG, shall remain the exclusive and
sole proprietary property of Dicom subject only to the rights to same granted to
CLG herein. Consistent with the foregoing, Dicom shall not make any sales or
distribution to any party of any Dicom Dental Software in the Territory other
than CLG without first obtaining the CLG's consent, which CLG may grant in it's
sole and absolute discretion.
8. Dicom Compensation and Term of Agreement. In consideration of the Dicom
Dental Software, license rights granted herein by Dicom to CLG, , and CLG shall
pay to Dicom the following sums as described hereafter:
(a) Cash. CLG shall pay to Dicom monetary sums in accordance with
Exhibit C attached hereto.
(b) Term. The License and this Agreement shall have the term and
renewal conditions specified in Exhibit D hereto.
9. Territory. Notwithstanding anything herein to the contrary, Dicom Dental
Software products may be sold by value added resellers in other countries
outside the Territory but may not be sold by value added resellers inside the
Territory without CLG's permission. On CLG's behalf, Dicom will use its
reasonable efforts to maximize protection of the Territory from other resellers,
but in no event is Dicom liable for the improper sales made by any third parties
nor shall the mere fact of the same be evidence of a Dicom Breach of this
Agreement. Dicom shall refuse to register any product, which it determines was
sold in the Territory by a third party and shall instead refer the registration
to CLG.
10. Additional Dicom Dental Software. Dicom may provide to CLG from time to
time, at Dicom's absolute and sole discretion, certain additional Dicom Dental
Software products not required to be licensed to CLG under this Agreement. Such
additional software products shall be compensated under the same percentage
royalty arrangement as articulated on Exhibits C & D attached hereto. Royalty
payments defined in Exhibits C & D attached hereto shall be defined as the Gross
Receipts from CLG's sale of Dicom Dental Software. "Gross Receipts" shall mean
all compensation, revenue, fees or other sums received by CLG from the license,
sale or use of the Dicom Dental Software net of credit card discounts and
customary local taxes. CLG shall pay to Dicom the equal portion of Gross
Receipts from the sales of Dicom Dental Software described herein on a quarterly
basis in accordance with a system of statements and payments, which would
provide for audit rights as described hereinafter.
11. Statements and Payments.
(a) CLG shall keep complete and accurate books of account and records, with
all appropriate entries therein, relating to the Dicom Dental Software sales,
which are utilized to determine Gross Receipts there from (hereinafter called
the "Audit Records"). CLG shall keep the Audit records for the preceding three
(3) years of transactions and shall make all Audit Records reasonable available
to Dicom upon Dicom's reasonable notice during normal business hours to examine
same and make copies through its representatives, accountants or counsel. During
the Term, CLG shall make equal Gross Receipts payments to Dicom as required
hereunder for each respective quarter calculated for Dicom Dental Software sales
beginning on the first day and ending on the last day of each respective quarter
subsequent to the Start Date herein. All equal Gross Receipts payments made
hereunder shall be in United States Dollars drawn on a United States bank
payable to Dicom. If CLG does not pay an equal Gross Receipts payment to Dicom
in a timely manner, time being of the essence in such payment, interest at the
rate of twelve percent 12% per annum shall accrue on any equal Gross Receipt
amount payable and due to Dicom hereunder calculated from the date on which such
equal Gross Receipts payment was payable and due until the date of payment.
Acceptance by Dicom, or its authorized representative, of a Gross Receipts
Statement for Dicom Dental Software sales (hereinafter called "Gross Receipts
Statement") or accompanying equal Gross Receipts payment shall not preclude
Dicom from questioning the correctness of such Gross Receipts Statement or the
amount of equal Gross Receipts owed in respect to same within a period of one
(1) year from the date of receipt of said Gross Receipts Statement by Dicom. In
the event that Dicom exercises its rights to examine the Audit Records and
discovers any short falls, inconsistencies or mistakes within such one (1) year
period, then CLG shall immediately rectify same at its sole expense and cost and
shall thereafter pay same within fifteen (15) days of receipt of written notice
of such short fall, inconsistency or mistake, if CLG cannot prove that its Audit
Records are correct. In the event that a deficiency in the Gross Receipts
Statement is confirmed by the respective parties to exist in a sum in excess of
Ten thousand dollars ($10,000.00 USD) for which CLG has not paid to Dicom the
equal Gross Receipts in question disclosed by such an examination or audit, CLG
shall pay to Dicom the reasonable cost for its examination and audit and shall
make payment within fifteen (15) days to Dicom of such equal Gross Receipts
deficiency in accordance with the conditions and terms of this Agreement. Dicom
shall have the right, through its licensing representative, independent
accountants or counsel to examine the Audit Records no more than two (2) times
in any twelve (12) month contract year hereunder.
(b) Within fifteen (15) days after the end of each quarterly period
described herein (hereinafter called "Quarterly Period") during the Term, and
within fifteen (15) days after the termination or expiration of this Agreement,
CLG shall submit to Dicom or its representatives accurate and complete
statements (hereinafter called "Gross Receipts Statements"), together with
payment for any amounts shown thereby to be payable and due to Dicom hereunder,
showing the description, quantity and compensation received for any sales of the
Dicom Dental Software during the preceding Quarterly Period for which CLG has
received Gross Receipts as a result thereof. The Gross Receipts Statements shall
be based upon CLG's Gross Receipts for the Quarterly Period then ended and shall
contain information sufficient to discern how the Gross Receipts were computed
for payment, if applicable. In the event that no Gross Receipts are payable to
Dicom during the Quarterly Period, but licenses, sales or use of the Dicom
Dental Software have occurred during said time, CLG shall furnish Dicom with a
Gross Receipts Statement evidencing such license, sale or use activity for
Dicom's examination and review.
(c) Within five (5) business days of the end of any month during the Term
of this agreement in which CLG makes a sale of any Dicom Dental Software, CLG
shall supply to Dicom a monthly report which shall contain the following
information, which shall be provided to Dicom in an electronic format of Dicom's
specification: i. Name, address, phone number, fax number and email of any
customers ii. Particulars about any products purchased iii. Method by which the
customer was acquired (ie radio, TV, Internet, etc.) iv. Any customer
satisfaction data which CLG receives relative to the same.
12. CLG Exclusivity - The Territory. Dicom will develop and utilize a world
wide web site on the Internet for informational, promotional, advertising and
marketing purposes to be known as "www.dicom-imaging.com" (hereinafter called
"Website"). Dicom shall make CLG its exclusive sole licensed distributor of
Dicom Dental Software in the Territory, and shall not allow any residents of the
Territory to make purchases of Dicom Dental Software through the Website.
13. Quality, Notices and Approvals.
(a) CLG represents and warrants that the quality and style of all
promotional, advertising, marketing and packaging material relating to same,
shall be of first class quality. CLG shall not distribute, license, sell or
allow use of the Dicom Dental Software which utilize the promotional,
advertising, marketing and packaging material or trademarks associated therewith
(hereinafter collectively called the "Trademark"), until Dicom shall have
examined and reviewed same and granted approval for the use thereof as described
herein, which approval Dicom shall not unreasonably withhold or delay.
(b) All promotional, advertising, marketing and packaging material
displaying a Trademark for the Dicom Dental Software shall contain the following
legal notices (or such other notices or legends as Dicom may from time to time
reasonably request) as appropriate to the respective Dicom Dental Software:
"[any trademarks of Dicom as described on Exhibit E hereto (Dicom Trademarks)]
are registered trademarks of Dicom Imaging Systems, Inc., and used under license
agreement."
Whenever appropriate, CLG shall also include the symbol or next to a
Trademark, wherever the Trademark is used by Dicom and/or CLG with the Dicom
Dental Software. CLG, in its use of the Trademark, will cause the foregoing
legal notices or legends to appear on the Private Builds and on the promotional,
advertising, marketing and packaging material related to same. CLG shall not
combine any other trade name, trademark, service mark or trademark notice with
the Trademark on the Private Builds in such a manner as to obscure or diminish
the integrity of the Trademark.
(c) Prior to the offering for distribution, license, sale or use of any of
the Dicom Dental Software products sold by CLG with the Trademark, and prior to
the use of any promotional, marketing and/or packaging material displaying the
Trademark, CLG shall provide representative samples of any Dicom Dental Software
products to Dicom so that Dicom can evaluate the quality of the Dicom Dental
Software products bearing the Trademark. CLG shall make diligent efforts to
ensure that the Dicom Dental Software products and all promotional, advertising,
marketing and/or packaging material relating to same meet reasonable
acceptability standards to maintain the goodwill and integrity of the Trademark.
In furtherance of the foregoing, CLG shall submit to Dicom samples of the Dicom
Dental Software products intended to be distributed, licensed, sold and used by
the public together with the promotional, advertising, marketing and/or
packaging material intended to be used in connection therewith. CLG shall not
use any promotional, advertising, marketing or packaging material or distribute,
license, sell or use any Dicom Dental Software products until Dicom shall have
approved, in writing, such material, product and/or services, based upon its
examination and review of the submitted samples. After Dicom has approved the
samples of the Dicom Dental Software products and/or promotional, advertising,
marketing and/or packaging material, CLG shall not materially depart there from
without Dicom's prior written consent. Dicom shall notify CLG of such approval
or disapproval within ten (10) days after Dicom's receipt of such Dicom Dental
Software products and/or promotional, advertising, marketing and/or packaging
material for Dicom's examination and review of the respective items. Any
submission which is not explicitly approved or disapproved within the foregoing
ten (10) day period shall be deemed approved by Dicom, and CLG shall have the
right to utilize same henceforth. All samples submitted by CLG to Dicom shall be
retained by Dicom as its exclusive property, but shall not be transmitted to
other third parties for distribution, marketing, license or sale. Provisions of
this Agreement to the contrary notwithstanding, nothing herein shall be
construed to require CLG to obtain prior permission for promotional or marketing
materials utilized for non-retail, non-public purposes, including promotion of
the sale of CLG's securities, CLG's business plan, or materials submitted to
potential business partners.
(d) CLG will not deviate substantially from the standards of quality of the
samples approved by Dicom during its examination and review of same. Departure
from such quality standards may constitute a breach of a material term of this
Agreement. For the purposes of protecting Dicom's interests under this
Agreement, CLG agrees to permit Dicom through its appropriate licensing
representative(s), at Dicom's own expense and cost, to inspect from time to time
CLG's facilities upon reasonable notice and at reasonable times subject to CLG's
discretion for the scheduling of same. CLG reserves the right to restrict any
inspection of its facilities or portions thereof which would compromise the
integrity of any proprietary work product for other third parties at its
facilities, or compromise CLG's proprietary and confidential information not
subject to Dicom's inspection or examination hereunder, which requires
confidentiality under the circumstances.
14. Goodwill of Trademark.
(a) CLG acknowledges the value of the goodwill associated with the
Trademark and that the Trademark is distinctive and has acquired secondary
meaning. CLG agrees, during the Term, and thereafter, never to challenge the
rights of Dicom or others in the Trademark.
(b) CLG acknowledges and agrees that the Trademark, the goodwill associated
with the Trademark, all rights pertaining to the Trademark and such further
goodwill are and shall remain the exclusive property of Dicom or the owners
thereof. CLG further acknowledges and agrees that its use of the Trademark
pursuant to the conditions and terms of this Agreement shall not entitle CLG to
acquire any rights in the Trademark, other than the licensed rights to utilize
same as described herein. By execution hereof, and to the extent possible under
applicable law, CLG hereby assigns to Dicom all of its right, title and
interest, if any, in and unto the Trademark, and further Dicom agrees to execute
and deliver such instruments and take such other action as may be required and
requested by Dicom to carry out the assignment contemplated herein.
(c) CLG shall promptly comply on a prospective basis with all instructions
and specifications from time to time communicated by Dicom in connection with
the use and display of the Trademark, not inconsistent with this Agreement.
15. Trademark Protection. CLG acknowledges that the trademarks, trade names
and design marks ("Trademark") used by Dicom and listed on Exhibit "E" attached
hereto and incorporated herein by this reference are the proprietary and sole
property of Dicom or otherwise licensed to Dicom for its use. CLG shall not use
the Trademark(s), except in the normal course of advertising and marketing the
Dicom Dental Softwares and shall appropriately designate the rights of the
parties therein on such advertising and marketing materials. CLG will distribute
the Dicom Dental Softwares only under Dicom's proprietary rights therein and
shall take all reasonable action to protect Dicom's rights therein. Upon
termination of this Agreement, CLG shall immediately cease the use of any of
Dicom's proprietary trademarks, trade names, design marks or rights.
16. Trademark Protection and Infringement.
(a) Dicom may obtain at its own cost and expense and in its own name,
appropriate trademark registrations for the Dicom Dental Softwares. Dicom and
CLG shall cooperate with each other using their diligent best efforts to obtain
such registrations, which set forth Dicom's interests and rights in and unto the
Dicom Dental Software. If Dicom requires any specimens or copies of invoices
establishing dates of first use of the Dicom Dental Software in connection with
filing any application for trademark registration, CLG shall provide Dicom with
such specimens.
(b) CLG agrees that it shall not, at any time:
(i) apply for any registration of any trademark or other designation,
which would adversely affect Dicom's rights in the Trademark;
(ii) file any document with any governmental authority or take any action
which would adversely affect Dicom's rights in the Trademark;
(iii) use or authorize the use of any trademark, trade name or other
designation identical with or confusingly similar to the Trademark;
(iv) use the Trademark, or sell, offer to sell, distribute or advertise the
Dicom Dental Software in any manner that does not comply with the provisions of
all applicable federal, state and local laws and regulations including, without
limitation, those relating to the use of trademarks;
(v) use or display the Trademark in a manner which might be confusing or
deceptive or might injure the good will and reputation associated with the
Trademark; or
(vi) otherwise commit any act, which would create a potential liability
on the part of Dicom or would adversely affect the goodwill and reputation
of the Trademark.
(c) Dicom shall have the right, but not the obligation, to prosecute,
defend and/or settle at its own cost and expense and in its sole discretion, all
actions, proceedings and claims involving the Trademark, and to take any other
action that it deems proper or necessary for the protection and preservation of
its rights in the Trademark. In its sole option, Dicom may take any action
described above in its own name, and/or in the name of CLG, and CLG will
cooperate fully therewith. All expenses of any action taken by Dicom to protect
its interests in the Trademark shall be borne by Dicom, and all relief granted
in connection therewith shall be solely for the account of Dicom, except as
described herein where CLG may participate in such action. In the event CLG
determines, in its absolute and sole discretion, that it desires to participate
with Dicom in any action, proceeding and/or claim or to initiate it's own action
to protect its interests in the Dicom Dental Software which utilize the
Trademark, then CLG shall proportionately bear its portion of the expenses
related to same with Dicom, and shall proportionately benefit in the relief
granted in connection therewith as it relates to CLG's rights. CLG shall notify
Dicom promptly of any adverse, pending or threatened action in respect of the
Trademark, and of any use by third parties that would or might tend to be
adverse to the rights of Dicom, if said action against the Trademark or adverse
use of the Trademark becomes known to CLG.
17. Representations and Warranties.
(a) Dicom represents and warrants to CLG:
(i) that it is a British Columbia corporation, duly organized, validly existing
and in good standing under the laws of said State;
(ii) that it has the full right, power and authority to enter into and perform
the obligations contemplated in this Agreement;
(iii) that this Agreement constitutes a legal, valid and binding obligation of
Dicom, enforceable in accordance with its conditions and terms; and
(iv) that neither Dicom nor any of its shareholders, directors or officers
is subject to, or a party to, any agreement, obligation, claim, action, order or
judgment, in effect, pending or threatened, which would adversely affect or
otherwise interfere with Dicom's performance under this Agreement.
(v) that the Dicom Dental Software will function as specified in
accordance with the current version of the Help documentation
that resides on the Dicom Dental Software.
(b) CLG represents and warrants to Dicom:
(i) that it is a British Columbia corporation, duly organized, validly existing
and in good standing under the laws of said Nation;
(ii) that it has the full right, power and authority to enter into and perform
the obligations contemplated in this Agreement;
(iii) that this Agreement constitutes a legal, valid and binding obligation
of CLG, enforceable in accordance with its conditions and terms;
(iv) that neither CLG nor any of its shareholders, directors or officers is
subject to, or a party to, any agreement, obligation, claim, action, order or
judgment, in effect, pending or threatened, which would adversely affect or
otherwise interfere with CLG's performance under this Agreement.
18. Indemnification.
(a) CLG hereby indemnifies Dicom and holds Dicom harmless and defends Dicom
from and against any and all claims, suits, losses, liabilities, causes of
action, damages and costs (including reasonable attorneys' fees), or the
settlement or avoidance thereof, arising out of any breach of CLG's
representations and warranties or breach of this Agreement. For purposes of this
subparagraph, "CLG" shall include CLG's officers, directors, employees, agents,
subsidiaries, parents and affiliates and partners.
(b) Dicom hereby indemnifies CLG and holds CLG harmless and defends CLG
from and against any and all claims, suits, losses, liabilities, causes of
action, damages and costs (including reasonable attorneys' fees), or the
settlement or avoidance thereof, arising out of any breach of Dicom's
representations and warranties or this Agreement. For purposes of this
subparagraph, "Dicom" shall include Dicom's officers, directors, employees,
agents, subsidiaries, parents and affiliates.
(c) The provisions of this Section shall survive the termination or expiration
of this Agreement.
19. Marketing and Sales. CLG shall use its reasonable efforts to advertise,
promote, market, distribute, lease and/or sell the CLG during the Term at its
own expense; however, CLG shall have the discretion to determine and set
conditions and terms for the promotion, marketing, licensing, sale and use of
the CLG described herein, subject to Dicom's approval rights set forth in
Section 13 [Quality, Notices and Approvals] herein. CLG shall be responsible for
distribution of the CLG through appropriate distribution channels, which may
include any of CLG's existing distribution channels; however, the level of
promoting and marketing efforts for the CLG engaged in by CLG shall be at CLG's
discretion.
20. Non-Compete. CLG shall not develop, release, manufacture, distribute,
license, sell, rent or lease to third parties or end users a directly competing
product to the Dicom Dental Software during the Term of this Agreement
(hereinafter called the "Non-Compete Period") without the written permission of
Dicom. For the purposes of this Section, "directly competing product" shall mean
any digital imaging software, whether implemented in software, shareware,
firmware or hardware, whether implemented in any of the available platforms or
not, utilized in any business context.
21. Dicom Dental Software Ownership.
(a) Code Ownership. Dicom has developed and owns, or has the licensed
rights to use, and has copyright and trademark rights thereto where applicable,
all of the proprietary software in object code form and all modifications or
additions to such code (hereinafter collectively called "Proprietary Code") as
is incorporated at any time in the Dicom Dental Software. The Proprietary Code
may be expanded upon during the Term of this Agreement and shall remain under
the exclusive ownership and control of Dicom. CLG acknowledges that it has no
right, title or interest in or unto the Proprietary Code and further has no
right, title or interest in or unto the Dicom. By execution hereof, CLG
acknowledges and agrees that all property rights to the Proprietary Code shall
remain the exclusive property of Dicom, and to the extent possible under
applicable law, CLG hereby assigns to Dicom all of its right, title and
interest, if any, in and unto the Proprietary Code (to secure Dicom's ownership
of the Proprietary Code which is integrally incorporated therein) and further
CLG agrees to execute and deliver such instruments and take such other action as
may be required and requested by Dicom to carry out the assignment contemplated
herein.
(b) Restrictions. Any provision to the contrary in this Agreement
notwithstanding, CLG shall not have the right to sell, license, market or
otherwise convey or authorize any use for the Dicom Dental Software whatsoever
outside of the field of Dentistry, nor shall CLG have the right to sublicense
the Dicom Dental Software in any manner whatsoever, except that CLG may grant
end user licenses to customers in the dental professions pursuant to the terms
of this Agreement and enter into agreements with other parties to resell the
Dicom Software. CLG shall not be permitted to sell the Dicom Dental Software for
an amount less than than Dicom's current retail and dealer pricing as posted by
Dicom from time to time without the express written permission of Dicom. Any
restrictions, provisions or limitations of this Agreement, which apply to the
Dicom Dental Software, also apply to the CLG.
22. Disclaimer. THE WARRANTIES IN THIS AGREEMENT REPLACE ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY LOSS OF PROFITS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY PERFORMANCE OR
NONPERFORMANCE HEREUNDER, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
23. Master Delivery and Acceptance.
(a) Dicom will develop and provide to CLG the Dicom Dental Software (i.e.,
CLG One - CLG Six) in the form of a Master developed in accordance with the
specifications for same (hereinafter called "Specifications"), which
Specifications shall be mutually acceptable to Dicom and CLG but developed in
Dicom's absolute and sole discretion relative to the appropriate software
considerations for same. In accordance with the Specifications, Dicom shall
provide and deliver to CLG the Master for CLG One on or before March 17, 2000.
Subsequent Masters for the additional Dicom Dental Software for CLG (i.e., CLG
Two - CLG Six) shall be provided and delivered to CLG by Dicom throughout the
Term . In the event that CLG requests that Dicom create further Dicom Dental
Software thereafter for CLG's use, CLG will gather all of the necessary Feature
information and material and forward an order for same to Dicom to determine
whether Dicom desires to develop and create same including the consideration
that Dicom will receive for such additional development. In the event that Dicom
determines that it desires to develop and create the additional Dicom Dental
Software for CLG, then Dicom will develop same in accordance with the
Specifications relating to the new development software and will provide to CLG
a timetable for the delivery of same. Notwithstanding anything herein to the
contrary, Dicom shall have a period of fifteen (15) days within which to
determine whether Dicom will undertake and accept an assignment from CLG to
develop and create additional Dicom Dental Software for CLG including the
consideration and determinations relative to same. Dicom shall agree to use its
best efforts to modify the CLG during the first year of the Term to the
satisfaction of CLG and shall use its best efforts to provide CLG with at least
one additional CLG each year thereafter throughout the course of the Term. Dicom
also agrees to upgrade the CLG whenever the Dicom Dental Software is upgraded at
no additional cost to CLG.
(b) Dicom agrees to provide CLG testing subject to further independent
examination and testing by third parties of CLG's choosing. Dicom shall advise
CLG in writing that it has completed its testing program and shall submit the
respective CLG to CLG for independent testing if CLG so desires. After the
delivery of each respective CLG (hereinafter called "Delivered Product"), CLG
shall evaluate the Delivered Product and shall submit a written acceptance or
rejection of same within ten (10) days of its submission for consideration. In
the event that CLG does not issue a written acceptance or rejection within the
ten (10) day period described herein, then CLG's silence shall be consider
acceptance for purposes of accepting the Delivered Product under this Agreement.
(c) In addition to the CLG "Master" which Dicom will deliver to CLG, Dicom will
retain an additional "Master" of each respective CLG at its offices.
24. Export Control. This Agreement is made subject to any applicable
regulation, restrictions or orders on the export from the United States of
America of control of commodities, technical data or of information concerning
such technical data, which might be imposed from time to time by the United
States of America. CLG will not export, indirectly or directly, any of the CLG
or other Dicom Dental Software to any country for which the United States of
America or any agency thereof requires governmental approval at the time of
export without first obtaining an export license or requires the existence of an
export license for same, and further subject to the requirement that CLG must be
able to export the CLG to said country in accordance with this Agreement's
conditions and terms. CLG UNDERSTANDS THAT IT IS ONLY PERMITTED TO SELL IN THE
TERRITORY AND MAY NOT SELL THE DICOM DENTAL SOFTWARE TO ANY PARTY OUTSIDE OF THE
TERRITORY. If CLG receives an inquiry from outside of the Territory, but for a
country in which Dicom has not yet made an exclusive relationship with a
reseller and forwards the same to Dicom and a sale results from such an inquiry,
Dicom shall pay to CLG one-half of the gross receipts from such sale or sales.
25. Shipment of Masters. Dicom will ship the respective CLG "Masters" to
CLG, or if CLG desires to its Replicator designated through written instruction
to Dicom, and will utilize the shipment carrier and method instructed by CLG in
its order to arrange for the shipment of the respective Master and will insure
same during such shipment. Such shipment from Dicom to CLG shall be from Dicom's
place of business to CLG or CLG's Replicator and all shipping, freight, tax and
insurance charges therefore shall be CLG's responsibility. Risk of loss of the
respective Master shall be CLG's risk after Dicom has delivered the respective
Master to the appropriate carrier for shipment.
26. Reproduction of Masters. CLG shall arrange for manufacturing and
replication of the respective CLG Masters with a Replicator acceptable to Dicom.
Before delivering the respective Master to such Replicator, CLG shall provide to
Dicom an Agreement of Non-disclosure and Confidentiality between the Replicator
and CLG ensuring that all of the proprietary and other information relating to
the respective Master are not disclosed to third parties without Dicom's written
consent. CLG shall designate in monthly reports how many respective CLG. CLG has
created from a respective Master and shall provide such report to Dicom within
fifteen (15) days after the end of any respective month during which CLG
replicated the Master for distribution or otherwise. Such information from CLG
to Dicom shall notify Dicom in writing of such replication of CLG or other Dicom
Dental Software from a respective Master in a timely manner.
27. Packaging. CLG will distribute and market the respective CLG, including
any Updates, Upgrades or Add-Ons thereto (i.e., Supplemental Products), only
under the covenants, conditions and terms of the Shrinkwrap License (hereinafter
called the "Shrinkwrap License") attached hereto as Exhibit A and incorporated
herein by this reference which CLG shall ensure is included with each respective
CLG delivered by same. CLG shall not, and will not exercise any authority to,
make representations, warranties or statements concerning the CLG that are
inconsistent or exceed the Shrinkwrap License.
28.. Support. Dicom and CLG agree that support for the CLG shall utilize
the Internet, E-mail and telephone resources to provide reasonable support
consistent with and the terms and conditions as described in Exhibit G attached
hereto and incorporated herein by this reference and shall include at least two
visits to the offices of CLG by Dicom personel per Term year of this Agreement,
the reasonable business travel expenses of which shall be borne by CLG.
29. Relationship. Nothing herein contained shall be construed to place CLG
and Dicom in a relationship as partners, joint venturers, employer and employee,
or principal and agent, respectively, and neither CLG nor Dicom shall have the
power to bind or obligate the other party in any manner whatsoever.
30. Assignment. Neither Dicom nor CLG shall sublicense, transfer or assign
any rights herein granted, except (upon prior written notice to CLG) to Dicom's
subsidiaries, affiliates or parents, or to CLG's subsidiaries, affiliates or
parents, without obtaining the other respective party's prior written approval,
which approval shall not unreasonably be withheld or delayed, and, if granted,
shall be conditioned upon the sublicensee's, transferee's, or assignee's
agreement in writing to abide by the same obligations, conditions and terms
applicable to the respective parties hereto.
31. Notices. All notices, approvals and other communications provided for
in this Agreement shall be made in writing and delivered personally or by
certified or registered mail, return receipt requested, postage prepaid, to the
parties at their addresses set forth below, or to such address as either party
may specify by like written notice to the other and shall be deemed given when
received. Failure to accept certified or registered mail shall be deemed a
receipt thereof within ten (10) days after the first notice of delivery of the
certified or registered mail. Any entity may change its address as designated
herein by giving notice thereof as provided herein.
If to CLG: ........c/o Laurence Armstrong
........Armstrong Nikolich
........Suite 300 - 1005 Langley Street
........Victoria, BC
........V8W 1V7.. ........
If to Dicom: ........Dicom Imaging Systems, Inc.
........Suite 847 1350 East Flamingo Blvd.
........Las Vegas Nevada, 89119
........Attn Mr. Wayne Rees
........
or such other address either party from time to time specify in writing to the
other.
32. Confidentiality. Dicom and CLG agree that the conditions and terms of
this Agreement shall be deemed confidential information between the respective
parties. Each respective party expressly undertakes to retain in confidence and
to require its directors, officers, employees, representatives and agents to
retain in confidence all information between the respective parties that the
disclosing party has identified as being confidential and/or proprietary or
which, by the nature of the circumstances surrounding the disclosure, should in
good faith be treated as confidential and/or proprietary. Without limiting the
foregoing, all of the conditions and terms of this Agreement shall be considered
confidential and shall not be disclosed (except to either respective party's
prospective acquisition partners, accountants, attorneys, advisors and
consultants, including financial institutions and sources and potential
financing entities, together with such foregoing entities' directors, officers,
employees, representatives and agents, on a need to know basis and provided that
such parties are bound by the conditions and terms of this non-disclosure
section) without the prior written consent of the other respective party, except
that the respective parties may disclose confidential information as required by
governmental entity or court of law with the power to compel such disclosure but
only after giving the other respective party an opportunity and due notice to
defend against the disclosure requirement. The respective parties stipulate and
agree that upon expiration or termination of this Agreement, each respective
party will return to the other respective party all specifications, memorandums,
blue prints, drawings, designs, devices, documents, notes and any other material
containing or disclosing any confidential and/or proprietary information of the
other respective party. The respective parties may mutually agree in writing
that rather than returning all said documentation, the possessing party of such
documentation shall destroy the confidential and/or proprietary information in
its possession in accordance with this section. Neither respective party will
retain any such documentation relating to confidential and/or proprietary
information without the other respective party's prior written approval thereof.
33. Mediation/Arbitration. Any controversy, claim, misunderstanding, cause
of action, matter in question, breach or disagreement arising out of, or
relating to, this Agreement (hereinafter called "Dispute") shall be decided by
mediation or arbitration as follows:
(a) Mediation: The party seeking resolution of a Dispute (hereinafter
called "Complaining Party") shall provide the other party (hereinafter called
"Responding Party") with written notice describing the Dispute and requesting
mediation (hereinafter called "Mediation Notice") thereof including the naming
therein of its proposed mediator. Within ten (10) calendar days of the delivery
date of Mediation Notice, the respective parties shall appoint a mutually
acceptable mediator (hereinafter called "Mediator") to resolve the Dispute.
Within a reasonable period of time thereafter, not to exceed ten (10) calendar
days after appointing the Mediator, the respective parties in controversy
("Dispute") shall submit their respective cases to the Mediator who shall hear
the evidence and render a final decision thereon within three (3) calendar days
after the close of the evidence. The respective parties agree that the mediation
of the Dispute shall take place in Bellingham, Washington or such other location
mutually acceptable to the respective parties, and shall be governed by
Washington law. Any decision or award rendered by the Mediator, and acceptable
to the respective parties, shall be final and judgment thereon may be entered in
accordance with applicable law in any Court having jurisdiction thereof. If the
Mediator shall demand compensation for its services prior to mediation, then
Complaining Party and Responding Party shall pay said Mediator expenses on a
fifty-fifty (50-50) basis in advance of the mediation. The substantially
prevailing party in mediation shall be entitled to recover all expenses and
costs of mediation including its reasonable attorney's fees and any advanced
Mediator's expenses from the non-prevailing party.
(b) Arbitration: In the event the respective parties do not select a
mutually acceptable mediator within ten (10) calendar days of Mediation Notice,
the Complaining Party shall notify the Responding Party in writing of its demand
to arbitrate, and shall designate in such notice (hereinafter called
"Arbitration Notice") the name of its arbitrator. Within ten (10) calendar days
of the delivery date of Arbitration Notice, Responding Party shall select its
arbitrator. Within twenty (20) calendar days of the delivery date of Arbitration
Notice, the two (2) arbitrators so selected shall appoint a third arbitrator
(third arbitrator hereinafter called "The Arbitrator"). Within thirty (30)
calendar days of the delivery date of Arbitration Notice the respective parties
in controversy ("Dispute") shall submit their respective cases to the panel of
Arbitrators who shall hear the evidence and render a final decision thereon
within three (3) calendar days after the close of the evidence. The respective
parties agree that the arbitration shall take place in Seattle, Washington or
such other location mutually acceptable to the respective parties, and shall be
governed by Washington law in accordance with the American Arbitration
Association regulations and rules except as otherwise supplemented, modified or
amended herein. The Arbitrator shall be empowered to take such procedural and
discovery actions as the the Arbitrator deems appropriate, to the same extent as
a court acting pursuant to the Federal Rules of Civil Procedure. Any decision or
award rendered by the Arbitrator shall be final and judgment thereon may be
entered in accordance with applicable law in any court having jurisdiction
thereof. If the Arbitrator shall demand compensation for their services prior to
arbitration, then Complaining Party and Responding Party shall pay said
Arbitrators' expenses on a fifty-fifty (50-50) basis in advance of the
arbitration. The substantially prevailing party in arbitration shall be entitled
to recover all expenses and costs of arbitration including its reasonable
attorney's fees and any advanced Arbitrators' expenses from the non-prevailing
party.
(c) Equitable Remedy. Notwithstanding this Agreement's conditions and terms
relating to mediation and/or arbitration of Disputes, the respective parties
acknowledge and agree that breach of certain of the covenants, conditions and
terms of this Agreement, such as a breach creating irreparable harm, would have
an inadequate remedy at law, and may not be adequately remedied by damages, and
further consent and agree that temporary and/or permanent injunctive and other
relief may be sought and pursued to prevent irreparable harm to either
respective party for breach of this Agreement's covenants, conditions and terms
without waiving the right to seek actual damages thereafter.
34. Miscellaneous.
(a) Legal Representation. Each party to this Agreement has been represented
by counsel in the negotiation of this Agreement and accordingly, no provision of
this Agreement shall be construed against a party due to the fact that it or its
counsel drafted, dictated or modified this Agreement or any condition or term
thereof.
(b) Further Instruments. Each party hereto shall, from time to time,
execute and deliver such further instruments as any other party or parties or
its counsel may reasonably request to effectuate the intent of this Agreement.
(c) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
if and when applicable.
(d) Survival of Representations and Warranties. The respective
representations, warranties and agreements of the respective parties to this
Agreement and contained in this Agreement shall survive and remain in effect.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Wherever possible, each
provision, condition and term of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law; but if any provision,
condition or term of this Agreement, or any documentation executed and delivered
hereto, shall be prohibited by or invalid under such applicable law, then such
provision, condition or term shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision,
condition or term or the remaining provisions, conditions and terms of this
Agreement or any documentation executed and delivered pursuant hereto.
(f) Section Headings. The section headings inserted in this Agreement are
for convenience only and are not intended to, and shall not be construed to,
limit, enlarge or affect the scope or intent of this Agreement, nor the meaning
of any provision, condition or term hereof.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(h) Entire Agreement. This Agreement contains the entire Agreement between
the respective parties hereto and supersedes any and all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
No statement or representation of the respective parties hereto, their agents or
employees, made outside of this Agreement, and not contained herein, shall form
any part hereof or bind any party hereto. This Agreement shall not be
supplemented, amended or modified except by written instrument signed by the
respective parties hereto. (i) Attorneys' Fees and Costs: In any Dispute arising
out of or pertaining to this Agreement, the prevailing party, or substantially
prevailing party in multiple claims as the case may be, shall be entitled to an
award of its attorneys' fees and costs after a finally sustained determination
or decision, whether incurred before, after or during mediation, arbitration,
trial, or upon any appellate level.
(j) Time: Time is of the essence of this Agreement. When any time period
specified herein falls upon a Saturday, Sunday or legal holiday, the time period
shall be extended to 5:00 P.M. on the next ensuing business day.
IN WITNESS WHEREOF, the undersigned respective parties have caused this
Agreement to be executed in their names the day and year first above written.
Signed, sealed and delivered in the "CLG"
presence of:
CLG Investments, Inc.
By:
Print: Partner
Witness as to CLG
(Corporate Seal)
"DICOM"
DICOM IMAGING SYSTEMS, INC., a Nevada corporation
By:
Print: As its ___________________________
Witness as to Dicom
(Corporate Seal)
Exhibit List
EXHIBIT A - shrink wrap license attached (needs work)
EXHIBIT B - delivery schedule
EXHIBIT C- royalty payments and payment schedule
EXHIBIT D- term and renewal conditions -
EXHIBIT E - Dicom Trademarks
EXHIBIT F - CLG trademarks
EXHIBIT G - Support by Dicom
EXHIBIT A - End User Software License
IMPORTANT - READ CAREFULLY: This Dicom End-User License Agreement ("EULA")
is a legal agreement between you (either an individual or a single entity) and
Dicom Imaging Systems, Inc. ("Dicom") for the Dicom software product identified
above, which includes computer software and may include associated media,
printed materials, and "online" or electronic documentation ("SOFTWARE
PRODUCT"). By installing, copying, or otherwise using the SOFTWARE PRODUCT, you
agree to be bound by the terms of this EULA. If you do not agree to the terms of
this EULA, do not install, copy or use the SOFTWARE PRODUCT.
SOFTWARE PRODUCT LICENSE
The SOFTWARE PRODUCT is protected by copyright laws and international copyright
treaties, as well as other intellectual property laws and treaties.
The SOFTWARE PRODUCT is licensed, not sold.
1. GRANT OF LICENSE. This EULA grants you the following rights:
Software License. Dicom grants you the right to make and use as many copies
of the SOFTWARE PRODUCT as you have validly licensed copies of Dicom Image
Explorer and related modules. You may also make copies of the SOFTWARE PRODUCT
for backup and archival purposes.
2. DESCRIPTION OF OTHER RIGHTS AND LIMITATIONS.
Maintenance of Copyright Notices. You must not remove or alter any
copyright notices on all copies of the SOFTWARE PRODUCT.
Limitations on Reverse Engineering, Decompilation, and Disassembly. You may
not reverse engineer, decompile, or disassemble the SOFTWARE PRODUCT, except and
only to the extent that such activity is expressly permitted by applicable law
notwithstanding this limitation.
Separation of Components. The SOFTWARE PRODUCT is licensed as a single
product. Its component parts may not be separated for use on more than one
computer.
Rental. You may not rent, lease, or lend the SOFTWARE PRODUCT.
Performance or Benchmark Testing. You may not disclose the results of any
benchmark test of the SOFTWARE PRODUCT to any third party without Dicom's prior
written approval.
Support Services. Dicom may provide you with support services related to
the SOFTWARE PRODUCT ("Support Services"). Use of Support Services is governed
by the Dicom policies and programs described in the user manual, in "online"
documentation, and/or in other Dicom-provided materials. Any supplemental
software code provided to you as part of the Support Services shall be
considered part of the SOFTWARE PRODUCT and subject to the terms and conditions
of this EULA. With respect to technical information you provide to Dicom as part
of the Support Services, Dicom may use such information for its business
purposes, including for product support and development. Dicom will not utilize
such technical information in a form that personally identifies you.
Software Transfer. You may permanently transfer all of your rights under
this EULA (i) only in conjunction with a permanent transfer of your validly
licensed copy or copies of Dicom Image Explorer ; (ii) provided you retain no
copies; (iii) you transfer all of the SOFTWARE PRODUCT (including all component
parts, the media and printed materials, any upgrades; (iv) if applicable, you
include the Certificate of Authenticity, and (v) the recipient agrees to the
terms of this EULA. If the SOFTWARE PRODUCT is an upgrade, any transfer must
include all prior versions of the SOFTWARE PRODUCT.
Termination. Your rights under this EULA terminate upon the termination of
your Dicom Image Explorer ; operating system EULA. Without prejudice to any
other rights, Dicom may terminate this EULA if you fail to comply with the terms
and conditions of this EULA. In such event, you must destroy all copies of the
SOFTWARE PRODUCT and all of its component parts.
3. UPGRADES. If the SOFTWARE PRODUCT is labeled as an upgrade, you must be
properly licensed to use a product identified by Dicom as being eligible for the
upgrade in order to use the SOFTWARE PRODUCT. A SOFTWARE PRODUCT labeled as an
upgrade replaces and/or supplements the product that formed the basis for your
eligibility for the upgrade. You may use the resulting upgraded product only in
accordance with the terms of this EULA. If the SOFTWARE PRODUCT is an upgrade of
a component of a package of software programs that you licensed as a single
product, the SOFTWARE PRODUCT may be used and transferred only as part of that
single product package and may not be separated for use on more than one
computer.
4. COPYRIGHT. All title, including but not limited to copyrights, in and to
the SOFTWARE PRODUCT and any copies thereof are owned by Dicom or its suppliers.
All title and intellectual property rights in and to the content which may be
accessed through use of the SOFTWARE PRODUCT is the property of the respective
content owner and may be protected by applicable copyright or other intellectual
property laws and treaties. This EULA grants you no rights to use such content.
All rights not expressly granted are reserved by Dicom.
5. U.S. GOVERNMENT RESTRICTED RIGHTS. The SOFTWARE PRODUCT is provided with
RESTRICTED RIGHTS. Use, duplication, or disclosure by the Government is subject
to restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at DFARS 252.227-7013 or
subparagraphs (c)(1) and (2) of the Commercial Computer Software Restricted
Rights at 48 CFR 52.227-19, as applicable. Manufacturer is Dicom Imaging
Systems, Inc.
6. EXPORT RESTRICTIONS. You agree that you will not export or re-export the
SOFTWARE PRODUCT to any country, person, entity or end user subject to U.S.A.
export restrictions. Restricted countries currently include, but are not
necessarily limited to Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria.
You warrant and represent that neither the U.S.A. Bureau of Export
Administration nor any other federal agency has suspended, revoked or denied
your export privileges.
7. NO WARRANTIES. Dicom expressly disclaims any warranty for the SOFTWARE
PRODUCT. THE SOFTWARE PRODUCT AND ANY RELATED DOCUMENTATION IS PROVIDED "AS IS"
WITHOUT WARRANTY OR CONDITION OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT. THE ENTIRE RISK ARISING
OUT OF USE OR PERFORMANCE OF THE SOFTWARE PRODUCT REMAINS WITH YOU.
8. LIMITATION OF LIABILITY. In no event shall Dicom or its suppliers be
liable for any damages whatsoever (including, without limitation, damages for
loss of business profits, business interruption, loss of business information,
or any other pecuniary loss) arising out of the use of or inability to use the
SOFTWARE PRODUCT, even if Dicom has been advised of the possibility of such
damages. Because some states and jurisdictions do not allow the exclusion or
limitation of liability for consequential or incidental damages, the above
limitation may not apply to you.
MISCELLANEOUS
If you acquired this product in the United States, this EULA is governed by the
laws of the State of Washington.
If you acquired this product in Canada, this EULA is governed by the laws
of the Province of Ontario, Canada. Each of the parties hereto irrevocably
attorns to the jurisdiction of the courts of the Province of Ontario and further
agrees to commence any litigation which may arise hereunder in the courts
located in the Judicial District of York, Province of Ontario.
If this product was acquired outside the United States, then local law may
apply.
EXHIBIT B Dicom Dental Software Master CD's and delivery schedule
March 17, 2000 Closing/payment date
Master A
imagEXPLORER/EDITOR
Whitener
Update
Network Version
Company Video Tour
Master B
imagEXPLORER/EDITOR training
Whitener training
How to install Capture card
How to install Network
Master C
Simulator
Whitener
Update
Network Version
Company Video Tour
Master D
Simulator Help Training
Simulator Overview
Digital Photography Overview
Master E
Simulator Overview
Digital Photography Overview
Master F
Esthetic Evaluation Form
Master G
Lecturer Presentation CD
Master H
Sentry Software Codes
On or about August, 15 2000 for the following:
Master I
LabRX
Master J
LabRX training
Master K
XRAY
Master K
XRAY training
EXHIBIT C
ROYALTY PAYMENTS, LICENSE FEE AND PAYMENT SCHEDULES
For the sum of $2,250,000 USD ("License Fee"), Dicom hereby grants to CLG
the exclusive distribution rights and accompanying license to distribute copies
of Dicom's imageEXPLORER, imagEDITOR, Whitener and Simulator ("Licensed
Products") dental imaging software ("License") within the territory of the
Mexico, Brazil, Spain and Portugal ("Territory"). The License shall extend to
any other dental imaging software products developed by Dicom, if and when
available. $750,000 USD of the License Fee is due upon execution of this
Agreeement. The remaining $1,500,000 USD of the License Fee is due in two equal
installments due by August 1, 2000 and December 20, 2000 respectively. Time is
of the essence with respect to the payment of the License Fee and no grace
period is permitted. In addition to the License Fee, CLG shall pay to Dicom a
royalty of 20% of the Gross Receipts of all Licensed products, including service
and support related to any licensed product during the term of the Agreement
("Royalty"). The Minimum Royalty Payment due on the first, second and third
anniversaries of the agreement shall be $400,000, $800,000 and $1,600,000,
respectively and shall be $1,600,000 each year thereafter upon renewal, at the
option of CLG. No License Fee shall be due for any renewal period, above and
beyond the Minimum Royalty Payment.
EXHIBIT D
TERM AND RENEWAL CONDITIONS
The term of this Agreement is three years. This Agreement may be extended
by CLG for additional one year terms, provided CLG notifies Dicom of its
intention in writing to so extend at least ninety days prior to the expiration
of the original term. In the event of a renewal, CLG shall pay no additional
yearly License Fee, but shall make Minimum Royalty Payments as specified in
Exhibit C attached hereto. In addition, Dicom shall use its good faith efforts
to cooperate with CLG to negotiate the extention of this agreement to other
Latin American countries at CLG's request.
EXHIBIT E
DICOM TRADEMARKS
ImagEXPLORER
ImagEDITOR
Dicom Imaging Systems, Inc.
Dental Imaging Suite
LabRX
XRAY
Simulate
Simulator
Whitener
Image Explorer
Image Editor
The Imaging Standard in Dentistry
EXHIBIT G
SUPPORT
Software Maintenance by Dicom. Dicom shall provide the following
maintenance services in the form of software upgrade and level three software
support to CLG as described herein:
I. Level Three Support: Dicom shall use its best efforts to rectify within
a reasonable time of receipt of written notification by CLG of any problems with
the Product which results in any Product's not being in conformity with its
functional specifications as contained in the documentation delivered with such
Product. II. New Versions and Releases: Dicom shall provide new versions and
releases of the Product as they become available, which may contain either
modifications to existing functions or corrections to minor defects which have
been reported reasonable in advance of the version or release date.
III. Product Supported: Software maintenance services shall only be
provided for the current release of the Product in effect from time to time and
the release of the Product which immediately precedes any particular current
release (provided that support services shall not be provided for any
non-current release after the first anniversary of the date of issuance of the
current release) as modified for CLG by Dicom. Software maintenance services do
not include support of releases of the Product other than as specified above, or
support of any modifications made to the Product by CLG or made for CLG by
persons other than Dicom. In the event that Customer or CLG requests software
maintenance services from Dicom, and the case of the reported problem is
subsequently determined by Dicom to be the result of the use of a release of the
Product which is not supported, or modifications made to the Product by persons
other than Dicom, or a malfunction in computer hardware or other software or
abnormal operating conditions or accidental damage to the Product (electrical or
otherwise), then the Customer or CLG shall pay Dicom on a reasonable time and
materials basis for the performance of those services.
IV. Telephone Availability: Dicom shall provide reasonable telephone
support for the Product between the hours of 8:30 a.m. and 5:00 p.m., Pacific
Standard Time, excluding weekends and statutory holidays, to CLG's designated
support personnel for a period of one year.
V. Single Designated Site: Telephone support services shall be provided by
Dicom to a single designated individual at a single site of CLG to be designated
by written notice from CLG to Dicom. The location of the designated site may be
changed upon 14 days prior written notice by CLG to Dicom.
VI. Cost: Software maintenance services shall be provided to CLG at
Dicom's rates charged to its customers generally after one
year.