Exhibit 10.6.2
AMENDMENT NO. 2 TO LICENSING AGREEMENT
This Amendment No. 2 ("Amendment No. 2) to Licensing Agreement is made
as of 2002, December 10th by and between MedQuist Inc. ("MedQuist"), a New
Jersey corporation with its principal place of business at Five Greentree
Centre, Suit 311, Marlton, NJ 08053, acting on its own behalf and on behalf of
its wholly owned subsidiaries (direct and indirect) and Philips Speech
Processing GmbH ("Philips"), an Austrian corporation, with its registered place
of business at Computerstrasse 6, 1101 Vienna, Austria (MedQuist and Philips,
each a "Party" and, collectively, the "Parties").
WITNESSETH
WHEREAS, the Parties entered into a Licensing Agreement, dated as of
May 22, 2000, as amended by Amendment No. 1 of January 2002 (as amended, the
"Licensing Agreement") relating to the integration and use of certain Philips
speech recognition technology into MedQuist business; and
WHEREAS, the Parties desire to amend the Licensing Agreement by
modifying the pricing and fees and expanding the license to include additional
applications subject to the terms and conditions of this Amendment No. 2;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Parties agree as follows:
Section. Definitions.
(i) Unless otherwise defined in this Amendment No.2, capitalized terms
used in this Amendment No. 2 shall have the meanings given to them in
the Licensing Agreement.
The following definitions are added to Section 1 of the Licensing Agreement:
(ii) Service Bureau Services as defined in Amendment No.1 will be further
defined as:
"Service Bureau Services including Correction Services," where the
correction activity is part of the Service and is done by
MedQuist; and "ASP with Speech Recognition," where MedQuist does
not do the Correction.
(iii) "In-house solution" is the total software solution including Speech
Recognition software that helps customers to increase the efficiency
of the document creation process. Currently MedQuist sells XXXX and
YYYYY as the in-house solution for Radiology. As part of this
Amendment No. 2, Philips shall develop an "In-house" solution (iii)
that is functionally equivalent to those products.
(iv) "In house licenses business" is the business model where MedQuist
sells and implements the in-house solution with the integrated
Licensed Product within the IT environment of Customer.
(v) "Transfer Price" is the price for a product or service to be paid by
MedQuist to Philips.
Schedule D - Pricing
The first paragraph of Schedule D to Amendment No. 1 is hereby deleted
and replaced with the following:
(i) All License fees shall be based on a per payroll line basis. A
payroll line is defined as 65 black/white characters. From and after
December 1, 2002, the license fees for the Licensed Product will be
as follows:
o Service Bureau Service including Correction Services:
o For 2003, the lines fee will be free of charge under the
express condition that MedQuist, related to providing
Service Bureau Services with Correction Services, achieves
its forecast of lines going through its New Transcription
Platform ("NTP") using automated speech recognition ("ASR").
If MedQuist does not meet its forecast, then MedQuist will
pay $1,056,000. Payment will be made at end of the year
2003.
o For 2004 the same is valid as in 2003. Therefore, if the
forecast amount is not met, MedQuist will pay Philips at the
end of 2004 the amount of $3,600,000.
o If, in 2003 or in 2004, MedQuist does not meet its
forecasted lines, then right of first refusal as said in
section 2 of Amendment No.1 and related to Service Bureau
Service including Correction Services, will be cancelled.
o For 2005 and thereafter, a line fee of $0.XXX is agreed for
all lines.
o The foregoing is subject to the Licensed Product scaling and
functioning as part of the NTP in a commercially viable
manner at the volume levels set forth in the above
contemplated forecasts. If scaling issues inhibit MedQuist's
ability to achieve the forecasts, the parties will negotiate
in good faith to reach a mutually acceptable compromise.
o ASP with Speech Recognition:
o For 2003 and 2004 the line fee will be $0.0XX per line. In
2005, the line fee will be $0.0XX for all lines.
o MedQuist has the right to provide promotional pricing to any
client for up to 90 days for ASP with Speech Recognition
services. During this time, MedQuist will not be subject to
paying Philips a minimum line rate. Instead, for clients
receiving promotional pricing, MedQuist will pay Philips 50%
of the revenues that it collects as a result of ASP with
Speech Recognition. The promotional period for any specific
client should not exceed 90-days without Phillips' approval.
o "In house licenses business":
o Philips will, in cooperation with MedQuist and Philips
Medical Systems, develop a Philips in-house solution for the
Radiology business based on the requirements and
specifications of MedQuist.
o Delivery of this in-house solution is planned in Q4 2003.
Upon signing of this Agreement, MedQuist and Philips will
work in good faith to establish reasonable terms and
conditions of a development agreement ("Development
Agreement") including milestones, deliverables and other
customary terms and conditions for the in-house radiology
solution and a payment schedule for any amounts due after
the signing of this Agreement.
o MedQuist will pay Philips $1.2M in 2003 in instalments based
upon the delivery by Philips on jointly agreed milestones.
On signing of this Agreement, MedQuist will pay Philips 35%
of that amount. The balance shall be payable as agreed upon
in the Development Agreement.
o Until the Philips In-house solution (the replacement for
XXXXX) is available, the Philips Speech engine will be for
free under the express condition that it is bundled with
XXXX. (This special arrangement does NOT apply to any other
vendor solutions.). For every user license, MedQuist will
pay upfront per quarter, the Quarterly maintenance of $73.50
per user.
o Upon delivery of the Philips In-house solution, MedQuist
gets exclusivity for distribution only for this solution in
North America for 1 (one) year after the product is
commercially usable. The exclusivity will be reviewed
annually based on business results (meeting the forecast) in
that year. If the exclusivity is cancelled within 36 months
after a commercially usable product is delivered, then
Philips will pay to MedQuist (as liquidated damages for loss
of exclusivity and not as a penalty) an early termination
fee equal to US $33,333.33 for each month remaining in the
36 month term after the effective date of termination. By
way of example, if Philips terminates the exclusivity at the
end of 24 months after delivery, then Philips will pay a
termination fee equal to 12 times US $33,333.33.
o Transfer Price of the "In-house solution" needs to be
agreed, and it is hereby agreed that this will be lower than
the Transfer Price of XXXXX including a Speech Recognition
engine.
The Fees do not include sales, use, excise and similar taxes, or the cost of
shipping or insurance, for which MedQuist is responsible.
All charges for additional services shall be on commercial terms and conditions
that are reasonably acceptable to both parties.
All dollar amounts specified in this agreement are US dollars.
PHILIPS SPEECH PROCESSING GmbH MedQuist Inc.
By: /s/ Marcel Wassink By: /s/ Ethan H. Cohen
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Name: Marcel Wassink Name: Ethan H. Cohen
Title: Managing Director Title: EVP & CTO
PSP SRS