CONFIDENTIAL
EXHIBIT (d)(1)(P)
Schedule A-2
LICENSING AGREEMENT
This Agreement (the "Agreement") is made as of the 22nd day of May, 2000 by and
between MedQuist Inc. ("MedQuist"), a New Jersey corporation, with its principal
place of business at Five Greentree Centre, Suite 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").
W I T N E S S E T H
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WHEREAS, the parties hereto have executed a Tender Offer Agreement of this even
date, and this Agreement shall have effect from and after the date the tender
contemplated by the Tender Offer Agreement is completed (the "Effective Date");
WHEREAS, Philips has developed certain speech recognition and processing
technology and is in the business of licensing and further developing that
technology for integration into speech enabled products and services; and
WHEREAS, MedQuist is in the business of providing the Services (as defined
hereinafter); and
WHEREAS, Philips has developed certain software required for the use and
continuous improvement of the Contexts (as defined below), together with a
background lexicon database to enable the recognition of words included in such
database and their automated speech-to-text transformation and MedQuist wishes
to obtain a license to use such software for MedQuist's business; and
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WHEREAS, MedQuist and Philips desire to enter into a business relationship,
whereby the Parties intend to provide for the integration and use of certain
Philips speech recognition technology into MedQuist's business through a
cooperative effort governed by this Agreement, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
Parties agree as follows:
Section 1.
Definitions
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1.0 Words shall have their normally accepted meanings as employed in this
Agreement. The terms "herein" and "hereof", unless specifically limited,
shall have reference to the entire Agreement. The word "shall" is
mandatory, the word "may" is permissive, the word "or" is not exclusive,
the word "includes" and "including" are not limiting and the singular
includes the plural and vice versa. The following terms shall have the
described meaning.
1.1 "Agreement" shall mean this present document including, as an integral
part, its appendices, initialed or signed by the Parties and attached
hereto, and any modifications and updates made from time to time in
accordance with the provisions hereof.
1.2 "Confidential Information" shall have the meaning set forth in Section 8 of
this Agreement.
1.3 "Context" shall mean a specific speech recognition software module, which
can be added to the Licensed Product, containing a specialized class of
Language Resources optimized for a specific user or application group or
customer (e.g. gynecologists; radiologists; Ear-Nose-Throat specialists;
etc.).
1.4 "Customer(s)" shall mean any individual or entity purchasing MedQuist's
Services.
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1.5 "Derivative Works" shall have the meaning ascribed thereto in 17 U.S.C. 101
et seq.
1.6 "Documentation" shall mean all visually or electronically readable
materials, in English, developed by Philips for use in connection with the
Licensed Product and all revisions thereto, and new documentation issued to
reflect changes made in the Licensed Products.
1.7 "Effective Date" shall mean the date set forth in the preamble of this
Agreement.
1.8 "IP Rights" shall mean any patent, copyright, trade secret, trademark,
design, and mask work, or other intellectual property rights.
1.9 "Language Resources" shall mean the databases of words initially provided
by Philips to MedQuist which also incorporates phonetics and statistics to
enable the recognition and speech-to-text transformation of words included
in such database.
1.10 "Level 1 Support" shall mean support which is provided by the internal
MedQuist support unit to the MedQuist operational unit in response to an
initial phone call which identifies and documents a Problem and includes
initial responses to such internal calls, database searches for previously
reported problems, installation of Patches and Maintenance Releases and the
hand off of unresolved Problems to Level 2 Support. Level 1 Support is
performed by licensees themselves.
1.11 "Level 2 Support" shall mean support that includes, to the extent possible,
the recreation and resolution of Problems reported to Philips and for which
Philips shall initiate a resolution within a response time commensurate
with the severity level described in Schedule E.. This would normally
result either in a solution to the licensee by way of Patches or otherwise,
or in a hand off of unresolved problems to Level 3 Support.
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1.12 "Level 3 Support" shall mean support that includes, to the extent possible,
the resolution of Problems and the provision of Patches by Philips, all in
accordance with good engineering practices and for which Philips shall
initiate a resolution within a response time commensurate with the severity
level described in Schedule E.
1.13 "Licensed Product" shall mean (i) the SpeechMagic 4.0 software, in the
format developed by Philips in conjunction with which the Contexts will
operate and (ii) other software tools, all as are described in Schedule A.
In case a Context is added to the Licensed Product, then the term "Licensed
Product" shall include that Context.
1.14 "Maintenance Release" shall mean any version of the Licensed Product, which
includes a number of Patches (and sometimes minor new functionality), which
is recommended by Philips to be installed by existing licensees and
indicated as an increase after the decimal (e.g. 4.1, 4.2, 4.3).
1.15 "Major Release" shall mean a new version of the Licensed Product subsequent
to the initial delivery in which Philips has incorporated one or more new
functions, features or new technology of the Licensed Product developed by
Philips and which provides a new capacity which the previous releases or
versions of the Licensed Product did not have, together with new or revised
Documentation which properly describes the upgraded Licensed Product and
which is identified by a change in the release designation(e.g. 5.0, 6.0,
7.0).
1.16 "Object Code" shall mean computer programs for the Licensed Product
assembled or compiled in magnetic or electronic binary form on software
media, which are readable and usable by machines, but not generally
readable by humans without reverse-assembly, reverse-compiling, or reverse-
engineering the Licensed Product.
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1.17 "Patches" shall mean solutions or workarounds to Problems reported by
MedQuist or other licensees to Philips via the hotline service.
1.18 "Problem(s)" shall mean any error, problem, or defect resulting from (1)
incorrect functioning of the Licensed Product, or (2) an incorrect or
incomplete statement or diagram in Documentation, in the case of each of
(1) and (2), only if such error, problem or defect renders the Licensed
Products inoperable, causes the Licensed Products to fail to meet the
product description thereof (but not related to the success rate of the
Licensed Product), or causes the Documentation to be inaccurate or
incomplete in any material respect.
1.19 "Services" shall mean outsourced medical transcription activities provided
by MedQuist to third party customers.
1.20 "Work Made for Hire" shall have the meaning ascribed thereto in 17 U.S.C. @
Sec. 101 et seq.
Section 2.
Scope of License Grant, Ownership and Proprietary Rights
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2.1 Subject to the terms and conditions set forth in this Agreement, Philips
grants to MedQuist during the term of this Agreement, a personal, non-
assignable, non-transferable, indivisible, non-exclusive (except as
provided herein) license, without the right to sub-license, to use the
Licensed Product in Object Code and Documentation only (except as provided
in Section 6) for MedQuist's internal use at its sites, solely in
connection with MedQuist's network and in connection with providing
Services MedQuist accepts the grants made by Philips under this Section
2.1.
During the Term, as long as MedQuist is in full compliance with its
obligations hereunder,
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Philips undertakes not to grant a license of the Licensed Product and
Contexts, or similar products, to a competitor of MedQuist providing
outsourced medical transcription services in the USA. However, Philips
explicitly reserves the right to license the Licensed Product, Contexts and
similar products to others, such as, but not limited to distributors and
third party endusers who wish to use such products (including SpeechMagic
3.0 and 3.1) for non-outsourced medical transcription or other services.
For purposes of this Agreement, the term "outsourced" means that the
healthcare provider utilises medical transcriptionists that are not engaged
or employed by the healthcare provider nor his hospital organisation (i.e.
if a hospital records department or a doctor uses their own employees or
independent contractors or so-called statutory employees for their own
transcriptions and the transcription service is performed with technology
owned by or licensed to the hospital or doctor, the service is not
outsourced).
2.2 Nothing herein is intended to, or shall be deemed to, convey to MedQuist
any title or ownership interest in the Licensed Product, the Contexts, the
Documentation or any Derivative Works of any of the foregoing. MedQuist
acknowledges that, as between MedQuist and Philips, Philips is and shall
continue to be the owner of each of the foregoing, as it exists and as it
may be altered, modified or further developed, whether or not authorized,
and IP Rights associated therewith. Each Derivative Work, including
portions thereof and all copies thereof, in whatever medium, fixed or
embodied, shall be considered a "Work Made for Hire" and Philips shall own
all right, title and interest therein. MedQuist hereby assigns, and upon
creation of each Derivative Work automatically and irrevocably assigns, to
Philips ownership of all of MedQuist's right, title and interest in and to
such Derivative Work insofar as any such Derivative Work, by operation of
law, may not be considered a "Work Made for Hire" and MedQuist hereby
agrees to disclose to Philips all Derivative Works promptly upon creation
during the term of this Agreement. MedQuist reserves no rights, whatsoever,
in the Derivative Works.
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2.3 MedQuist agrees not to exceed the scope of the license granted in Section
2.1 and shall not copy (except as technically necessary to use the Licensed
Product in accordance with the license granted), alter, decompile,
disassemble, reverse engineer or otherwise attempt to learn any source
code, structure, algorithms or ideas underlying the Licensed Product, nor
shall it modify, translate or create derivative works (other than as
expressly permitted herein) based on the Licensed Product, except that
nothing in this Section 2.3 shall preclude integration of the Licensed
Product with MedQuist's technology infrastructure as contemplated by
Section 3.1.
2.4 Without limiting the generality of Section 2.2 hereof, Philips is being
granted full access to (a) modifications to the Contexts generated
automatically in the information technology infrastructure of MedQuist, (b)
medical documents in MedQuist's possession and (c) user sound data in
MedQuist's possession. Philips shall also have the right to copy, modify
and use such data under customary confidentiality obligations in order for
Philips to improve existing Contexts and generate new ones. MedQuist will
receive such Contexts on or before the date that they are generally made
available to other supported licensees of Philips. In addition, MedQuist
will receive during the Term on a quarterly basis a royalty of 3.5 % (three
and a half percent) of the license fees received by Philips from other
licensees for each Context developed on the basis of such access to
MedQuist's specific, Context related information described in the first
sentence of this Section 2.4, provided such Context uses text data from
MedQuist
2.5 MedQuist will not delete any Trademarks, trade names or copyright notices
present in or displayed by the Licensed Product. Neither party will claim
any right to use any of the Trademarks of the other party except pursuant
to this Agreement and its use of each Trademark will inure to the benefit
of the Trademark-owning party. Neither party (i) will act in any manner
that might reasonably injure the rights or goodwill of the other party with
respect to the other's Trademarks, (ii) will not challenge the validity or
ownership of
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the other's Trademarks, and (iii) will protect the other's Trademarks as
necessary and appropriate. MedQuist expressly acknowledges that all of
Philips' Trademarks with their associated goodwill, copyrights, trade
secrets and proprietary rights falling within the scope of this Agreement
are and shall remain the property of Philips. Philips similarly
acknowledges that all of the MedQuist Trademarks with their associate
goodwill, copyrights, trade secrets and proprietary rights falling within
the scope of this Agreement are and shall remain the property of MedQuist.
2.6 Each Party reserves all rights in its proprietary information and IP Rights
that are not explicitly granted to the other Party under this Agreement.
Nothing herein is intended to, or shall be deemed to, convey to Philips any
title or ownership interest in or license to the software MedQuist licenses
to its clients (whether owned by or licensed to MedQuist for sublicensing
purposes).
Section 3.
Delivery.
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3.1 Philips shall deliver the Licensed Product in Object Code form and related
Documentation to MedQuist in accordance with Schedule A. MedQuist will be
responsible for integrating the Licensed Product into MedQuist's existing
information technology infrastructure. However, Philips will provide
consultancy support to MedQuist covering integration, customization and
start up activities in order to ensure the speedy and efficient
introduction of this new technology. Up to fifteen man-years of such
support activities is included within the initial sign up fee described in
Section 4 below, to be consumed no later than December, 31 2001 on the
basis of a timeschedule and workplan to be mutually agreed within 45 days
after the Effective Date. In addition, as part of such sign up fee, Philips
will provide Licensed Product and Level 1 Support services training
sufficient in order for MedQuist's employees
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to become familiar with the use of the Licensed Products and to be able to
execute internally Level 1 Support services.
3.2 Subject to MedQuist's compliance with applicable Fee obligations set forth
in this Agreement, Major Releases of the Licensed Product shall be added to
this Agreement and delivered to MedQuist at the time such Major Releases
are made available to other supported licensees of Philips at no additional
cost to MedQuist.
Section 4.
Pricing
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4.1 The initial sign up fee payable by MedQuist to Philips shall be US$ 2.25
million payable in accordance with Schedule D (but not earlier than the
Effective Date). The minimum annual as well as ongoing license fees for the
Licensed Product payable by MedQuist to Philips are set forth in Schedule D
(the "Fees"). The Fees (including the initial sign up fee) do not include
sales, use, excise and similar taxes, nor the cost of shipping or
insurance, for which MedQuist is responsible.
4.2 During the term of this Agreement and any extension thereof, MedQuist shall
send a statement to Philips within ten (10) days following the last day of
each calendar quarter certifying, in summary form, (i) the use of the
Licensed Products and the basis for the Fees calculations set forth in
Schedule D hereto and (ii) the Fees due for such period. Appropriate
payments for each calendar quarter shall be made within 60 days after the
date of such statement, and in no event later than the last day of the
calendar quarter following the quarter covered by such statement. Upon
MedQuist's request, Philips shall send an invoice covering the Fees so
stated.
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4.3 MedQuist shall maintain for at least three (3) years its records, contracts
and accounts relating to Licensed Product and its use thereof, and will
permit examination thereof as well as access to the Licensed Product upon
reasonable request and during normal business hours by authorized
representatives of Philips. In addition, Philips may at its own expense
audit the books of account of MedQuist relating to this Agreement at the
place where such books are kept, in order to investigate compliance with
the payment obligations hereunder; such audits may not take place more than
twice a year, unless an audit has revealed underpayments to Philips. Any
such audit shall be conducted by an independent professional auditor
reasonably acceptable to both parties, on at least ten (10) working days
prior written notice and during normal business hours. A copy of the report
made by such auditor shall be provided to both Parties at the same time. If
during the course of such audit, it is discovered that any payment owed to
Philips hereunder was not made or was miscalculated and the discrepancy in
MedQuist's favor is five percent (5%) or more in any given period of 3
months or more (a "Payment Default"), the cost of such audit shall be borne
by MedQuist. Furthermore, MedQuist shall immediately remedy such Payment
Default, together with interest at the rate of 10% per annum (or such lower
rate as may be the maximum allowable by law) calculated from the date such
payment was due until such payment is actually made.
4.4 MedQuist shall submit to Philips, once per calendar year, a written
statement by its external auditors, who shall be independent certified
accountants, confirming that the quarterly statements submitted by MedQuist
to Philips for the preceding calendar year, were true, complete and
accurate in every respect. MedQuist shall use all commercially reasonable
efforts to cause such statement to be submitted within 120 days following
the end of the fiscal year.
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4.5 For Level 2 and Level 3 Support services rendered by Philips in accordance
with Schedule E, MedQuist will pay Philips fees as set forth on Schedule D.
Section 5.
Warranties, Indemnity and Liability Limitations
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5.1 Schedule C sets forth the warranties and indemnification obligations of
MedQuist and Philips in connection with this Agreement.
Section 6.
Further obligations of the Parties
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6.1 In order that the relationship contemplated by this Agreement shall be
mutually advantageous, and in recognition of the particular expertise and
commitment necessary to properly use and support the Licensed Product,
MedQuist agrees during the Term to comply with the following requirements:
MedQuist shall (i) conduct business in a manner that does not reflect
negatively at any time on the good name, goodwill and reputation of
Philips; (ii) avoid deceptive, misleading or unethical practices that are
or might be detrimental to Philips, its product or the public; (iii) make
no false or misleading representations with regard to Philips or its
products; (iv) not purchase, license or use a product competing with the
Licensed Product during the Term; and (v) for any and all of its present
and future speech technology needs, first invite Philips to submit a
competitive offer. In case MedQuist is dissatisfied with such offer and
subsequently receives a more attractive offer from a third party, MedQuist
will afford Philips a final opportunity to match such third party offer.
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6.2 Philips hereby grants to MedQuist a most favored customer status, meaning
that in case Philips affords a third party/medical outsourcing
transcription service provider outside the USA a license of the Licensed
Product on terms and conditions which, taken as a whole, are more favorable
to such third party than those set forth herein are to MedQuist, Philips
will notify MedQuist within thirty days of agreeing to those better terms
and MedQuist will then have a 30 day period to decide whether or not it
wishes to replace these terms and conditions with those contained in the
third party agreement.
6.3 In case MedQuist wishes Philips to develop additional enhancements,
modifications or features to the Licensed Product, Philips is willing to
negotiate same on reasonable, commercial terms and conditions and to
undertake such activities, provided the parties hereto can agree on
timeschedule, workplan, pricing and licensing conditions in connection with
such possible development activities. Philips shall not transfer ownership
on any development work under any circumstances, but is willing to discuss
extending the exclusivity hereunder to such development work or provide up
to a 3 month lead time in such case.
Within twenty (20) days after receiving MedQuist's request pursuant to
Section 6.3., Philips shall notify MedQuist of Philips's proposed prices,
timeschedule, licensing conditions and other terms and conditions for
performing such development work (unless Philips has declined, as set forth
hereinafter). If MedQuist provides notice ("Acceptance Notice") accepting
Philips's price and other performance terms, Philips shall perform such
work at the accepted price and on the accepted performance terms. If either
(i) Philips declines any work requested pursuant to this Section 6.3, or
(ii) MedQuist provides notice that it does not accept Philips's price and
performance terms, then MedQuist may engage a third party to perform such
work, provided that such third party acknowledges that it has no license or
right to any part of the Licensed Product nor access to the source codes.
Whenever
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MedQuist shall use such a third party developer, Philips shall allow such
third party such access to the Licensed Product as shall be reasonably
necessary to complete such work and shall cooperate with such third party,
provided that such access and cooperation shall be subject to such third
party (i) executing reasonable and appropriate security and confidentiality
agreements with Philips, (ii) abiding by Philips' internal policies
applicable to all third party developers, and (iii) agreeing to reimburse
Philips for Philips' internal and out-of-pocket expenses incurred in
providing such access and cooperation.
6.4 If MedQuist reasonably determines that Philips cannot or chooses not to
provide changes which are required for the Licensed Product to remain in
compliance with all applicable laws by thirty (30) days prior to a deadline
imposed by governmental authority, MedQuist shall have the right to
contract with a third party for such work or to do such work itself. The
provisions of Section 6.3 relating to contracting with a third party shall
apply to such a contract with a third party under this Section 6.4.
Upon reasonable advance written notice to Philips, MedQuist may request,
and if it so requests Philips shall use its good faith efforts to
accommodate, prioritization of supporting such changes over any other
software development work performed by or on behalf of Philips.
6.5 In case Philips intends to introduce speech technology applications to
outsourcing service companies like MedQuist in other fields (e.g. law;
insurance), it will first discuss such plans with MedQuist in order to
jointly investigate whether or not MedQuist is optimally positioned to
exploit such technology in such other fields as well.
Section 7.
Term and Termination
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7.1 Unless earlier terminated pursuant to this Section 7, this Agreement will
have an initial term of five (5) years from the Effective Date. After the
expiration of the initial term, this Agreement will thereafter continue for
subsequent five year terms, unless earlier terminated as provided below.
Neither party will be liable for terminating this Agreement in accordance
with its terms.
7.2 This Agreement can be terminated as follows:
7.2.1 Philips shall have the right to terminate this Agreement for cause
immediately in the event that (i) MedQuist defaults in any payment
due to Philips and such default continues for a period of thirty
(30) business days after written notice to MedQuist; (ii) MedQuist
fails to perform any material obligation, duty or responsibility or
is in default with respect to any material term or condition
undertaken by it under this Agreement and such default continues
for a period of thirty (30) business days after written notice to
MedQuist; or (iii) a receiver is appointed for MedQuist or its
property, or it makes an assignment for the benefit of its
creditors, or any proceedings are commenced by, for or against it
under any bankruptcy, insolvency or debtor's relief law, or it is
liquidated or dissolved. In case the tender for MedQuist shares is
not consummated in accordance with the terms of the Tender Offer
Agreement, this Agreement shall have no effect, unless confirmed by
both the parties hereto.
7.2.2 MedQuist shall have the right to terminate this Agreement
immediately in the event that (i) Philips fails to perform any
material obligation, duty or responsibility or is in default with
respect to any material term or condition undertaken by it under
this Agreement and such default continues for a period of thirty
(30) business days after written notice to Philips; or (ii) a
receiver is appointed for Philips or its property, or
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it makes an assignment for the benefit of its creditors, or any
proceedings are commenced by, for or against it under any
bankruptcy, insolvency or debtor's relief law, or it is liquidated
or dissolved or (iii) Philips defaults in any payment due to
MedQuist and such default continues for a period of thirty (30)
days after written notice to Philips.
7.2.3 Either Party shall have the right to terminate this Agreement (both
at the end of the initial term and during or at the end of any
subsequent term) at its sole discretion upon at least a two (2)
years prior written notice to the other Party, the first
possibility to issue such notice shall be no sooner than at the end
of the initial term (i.e. the term of the license will be at least
7 years).
7.3 Upon the termination of this Agreement, all fees owed by one Party to the
other Party pursuant to this Agreement shall be paid within ten (10) days
after the date of termination.
7.4 Upon the termination of this Agreement, all licenses granted hereunder
shall terminate. Each Party shall return to the other Party, erase, or
destroy all copies of the other Party's Confidential Information in its
possession or reasonably obtainable and shall certify same has been done.
7.5 Sections 5, 7.3, 7.4, 8, 9 and 10 shall survive the termination of this
Agreement.
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Section 8.
Confidential Information
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8.1 The Parties agree all information and materials received by one Party from
the other Party ("Disclosing Party"), including Licensed Product,
Documentation, Contexts, Language Resources, the terms of this Agreement
and any information and materials about the other Party's business,
product, technologies, customers, patient information and suppliers
identified by the Disclosing Party as confidential and proprietary to, and
trade secrets of, the other Party are referred to as "Confidential
Information".
8.2 Each Party agrees to hold all Confidential Information of the Disclosing
Party in strict confidence, not to disclose it to others and not to allow
any unauthorized person access to it, either before or after termination of
this Agreement.
8.3 Each Party agrees to restrict dissemination of the Confidential Information
of the other Party to only those persons within its organization who must
have access to such information to enable the Party receiving Confidential
Information to perform its obligations under this Agreement.
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8.4 A Party (the "Receiving Party") shall not be liable for the disclosure or
other use of Confidential Information which (a) is in the public domain at
the time of disclosure through no fault of such Receiving Party, (b)
becomes rightfully known to such Receiving Party from a third party under
no obligation to maintain confidentiality, (c) becomes publicly available
through no fault of or failure to act by such Receiving Party in breach of
this Agreement, (d) was independently developed or already known by such
Receiving Party prior to the Parties having access to one another's
Confidential Information, as proven with documentary evidence, or (e) is
required by court order or by governmental authority to be disclosed,
provided that such Receiving Party promptly notifies the Disclosing Party
that it may be required to make a disclosure and uses reasonable efforts to
make such disclosure subject to a protective order or confidentiality
agreement.
Section 9.
Publicity
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9.1 The Parties will jointly draft and approve any press release and other
announcements to the public relating to the Licensed Product and the
intended cooperation set forth herein; neither Party shall issue any other
press release or make any other public announcement relating to this
Agreement without the prior written consent of the other Party.
Section 10.
General Terms
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10.1 This Agreement is not transferable or assignable without the prior written
consent of the other Party hereto, except by merger, reorganization,
consolidation, or sale of all or substantially all of the Party's assets.
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10.2 This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York, without regard to its choice of law
rules.
10.3 This Agreement, including the Schedules, contains the complete agreement
between the Parties with respect to the subject matter herein and
supersedes all previous and collateral agreements relating thereto.
10.4 This Agreement may only be amended and obligations under this Agreement may
only be waived by a written instrument signed by both Parties. No failure
or delay by any Party in exercising any right under this Agreement shall
operate as a waiver.
10.5 Nothing contained in this Agreement shall be construed as making either
Party the agent of the other Party, as granting to the other Party the
right to enter into any contract on behalf of the other Party, or as
establishing a partnership or a relationship of principal or agent between
the Parties.
10.6 If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in
full force and effect.
10.7 The headings of sections, portions or paragraphs of the Agreement are for
convenience only and shall not affect the interpretation of the respective
rights and obligations of the Parties.
10.8 Neither Party shall be liable on account of or lose its rights under this
Agreement because of any delay or failure in performance (other than
payment) caused by governmental restrictions, war, civil commotion, riots,
strikes, lock outs and acts of God such as fire and flood or other similar
cases that are beyond the control of the Parties.
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10.9 All notices, consents and approvals given under this Agreement shall be
in writing and shall be delivered in person, by first class or express
mail or by facsimile confirmed by telephone to the address set forth
below:
If to Philips: If to MedQuist:
Philips Speech Processing GmbH MedQuist Inc.
Computerstrasse 6 Five Greentree Centre, Suite 311
A-1101 Vienna, Austria Marlton, NJ 08053
Facsimile: + 43.1.602-3359 Facsimile: (856) 596-3351
with a copy to:
Office of the General Counsel Office of the General Counsel
Philips Speech Processing MedQuist, inc.
Five Greentree Centre, Suite 311
64 Perimeter Center East, Marlton, NJ 08053
Atlanta, Georgia 31146-467300
Facsimile: (770) 821-2700 Facsimile: (856)797-5949
or at such other address as either Party may from time to time advise the
other Party in accordance herewith.
10.10 In no event shall Philips have any liability under this Agreement
including but not limited to direct or indirect damages of any kind or
nature, in the aggregate, in excess of the payments actually received by
Philips under this Agreement, whether arising by contract, tort, strict
liability or otherwise and in no event shall either party be liable for
any indirect damages, including any consequential (including, but not
limited to, loss of profits or
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revenues, loss of use of or damage to any associated equipment, cost of
capital, cost of substitute products, facilities or services, downtime
cost, or claims of customer), special, indirect or incidental damages.
10.11 This Agreement may be executed in several counterparts, all of which
taken together shall constitute one single Agreement between the Parties.
The parties agree to accept facsimile signatures with originals being
exchanged afterwards.
Section 11.
Dispute Resolution
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11.1 General. Except as otherwise provided in this Agreement, disputes between
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Philips and MedQuist relating to the interpretation or application of
this provisions of this Agreement shall be resolved in accordance with
this Section 11.
11.2 Informal Dispute Resolution. Any dispute between the parties arising out
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of or with respect to this Agreement, either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance by Philips or MedQuist, shall be resolved as provided in this
Section 11.2.
Prior to the initiation of formal dispute resolution procedures, the
parties shall first attempt to resolve their dispute informally, as
follows:
(A) Representatives for each party (designated within 30 days after
notice of the dispute is given (the "Representatives")) shall meet
for the purpose of endeavoring to resolve such dispute. They shall
meet as often as the parties reasonably deem necessary in order to
gather and furnish to the other all information with respect to the
matter in issue which the parties believe to be appropriate and
germane in connection with its resolution. The
20
Representatives shall discuss the problem and negotiate in good faith
in an effort to resolve the dispute without the necessity of any
formal proceeding.
If, within fifteen (15) days after a matter has been identified for
resolution pursuant to this Section 11.2, either of the
Representatives concludes in good faith that amicable resolution
through continued negotiation by them does not appear likely, the
matter shall be referred to the Supervisory Committee of the Board of
Directors of MedQuist upon formal written notification to such effect
by either Representative (provided such Supervisory Committee is then
in existence), in an attempt to mediate the dispute; in case such
mediation fails, the matter will be escalated by formal written
notification to the respective chief executive officers of the
Parties. The parties will use their respective best efforts to cause
the MedQuist CEO and the Philips CEO to meet to attempt to resolve
the dispute.
Formal proceedings for the resolution of a dispute may not be
commenced until the earlier of: (i) the date on which the MedQuist
CEO and the Philips CEO conclude in good faith that amicable
resolution through continued negotiation of the matter does not
appear likely; or (ii) thirty (30) days after the dispute has been
referred to the MedQuist CEO and the Philips CEO.
The provisions of this Section 11 shall not be construed to prevent a
party from instituting, and a party is authorized to institute,
formal proceedings earlier to avoid the expiration of any applicable
limitations period.
11.3 Arbitration. If the parties are unable to resolve any controversy arising
-----------
under this Agreement as contemplated by Section 11.2, then such
controversy shall be submitted to mandatory and binding arbitration at
the election of either Party (the "Disputing Party") pursuant to the
following conditions:
21
(i) The Disputing Party shall notify the American Arbitration
Association ("AAA") and the other Party in writing describing in
reasonable detail the nature of the dispute (the "Dispute Notice"). The
parties shall each select a neutral arbitrator in accordance with the
rules of AAA and the two (2) arbitrators selected shall select a third
neutral arbitrator. The three (3) arbitrators so selected are herein
referred to as the "Panel." The Panel shall allow reasonable discovery as
permitted by the Federal Rules of Civil Procedure, to the extent
consistent with the purpose of the arbitration. The Panel shall have no
power or authority to amend or disregard any provision of this Section
11. The arbitration hearing shall be commenced promptly and conducted
expeditiously, with each of Philips and MedQuist being allocated one-half
of the time for the presentation of its case. Unless otherwise agreed to
by the parties, an arbitration hearing shall be conducted on consecutive
days. Should any arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Section, such arbitrator
shall be replaced by an arbitrator selected in accordance with the rules
of the AAA and consistent with this Section 11. The Panel rendering
judgment upon disputes between parties as provided in this Section 11
shall, after reaching judgment and award, prepare and distribute to the
parties a writing describing the findings of fact and conclusions of law
relevant to such judgment and award and containing an opinion setting
forth the reasons for the giving or denial of any award. The award of the
arbitrator shall be final and binding on the parties, and judgment
thereon may be entered in a court of competent jurisdiction.
Arbitration hearings hereunder shall be held in New York, New York or
other mutually agreeable location.
The Panel shall be instructed that time is of the essence in the
arbitration proceeding. The Panel shall render its judgment or award
within fifteen (15) days following the conclusion of the hearing.
Recognizing the express desire of the parties for an expeditious means of
dispute
22
resolution, the Panel shall limit or allow the parties to expand the
scope of discovery as may be reasonable under the circumstances.
11.4 Litigation. In the event of a breach of the confidentiality obligations
----------
set forth in this Agreement, or in the event a party makes a good faith
determination that a breach of the terms of this Agreement by the other
party is such that the damages to such party resulting from the breach
will be so immediate, so large or severe, and so incapable of adequate
redress after the fact that a temporary restraining order or other
immediate injunctive relief is a necessary remedy, then such party may
file a pleading with a court seeking immediate injunctive relief. If a
party files a pleading with a court seeking immediate injunctive relief
and this pleading is challenged by the other party and the injunctive
relief sought is not awarded in substantial part (or in the event of a
temporary restraining order is vacated upon challenge by the other
party), the party filing the pleading seeking immediate injunctive relief
shall pay all of the costs and attorneys' fees of the party successfully
challenging the pleading. Philips and MedQuist each consent to venue in
New York, New York and to the nonexclusive jurisdiction of competent New
York state courts or federal courts located in New York, for all
litigation which may be brought, subject to the requirement for
arbitration hereunder, with respect to the terms of, and the transactions
and relationships contemplated by, this Agreement.
23
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their authorized representatives.
PHILIPS SPEECH PROCESSING GmbH MedQuist Inc.
By: /s/ C. Vohringer By: /s/ David A. Cohen
____________________________ ____________________________
Name: C. Vohringer Name: David A. Cohen
Title: General Manager Title: Chief Executive Officer
24
SCHEDULE "A"
List of Licensed Product, Contexts and Documentation
SpeechMagic 4.0 and future Major Releases
All Philips proprietary Contexts
The Context Customization Tool
25
SCHEDULE "B"
Description of Philips Trademarks
The terms and conditions under which MedQuist can use the trademarks indicated
below in accordance with Corporate Guidelines will be communicated separately to
MedQuist by the Royal Philips Electronics, Corporate Intellectual Property Dept.
within thirty days of the Effective Date
26
SCHEDULE "C"
Warranties, Indemnification and Limitation on Liability Provisions
------------------------------------------------------------------
1. Warranties of Both Parties.
--------------------------
1.1 As a material inducement to the other Party to enter into this
Agreement, each of the Parties warrants to the other that:
(i) it is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and it is
in good standing and qualified to do business in every
jurisdiction where the nature of its business or the lease or
ownership of property requires it to be so qualified or where
failure to so qualify may materially affect its ability to
perform its obligations hereunder;
(ii) it has the full power and authority to execute, deliver and
perform this Agreement;
(iii) this Agreement has been duly authorized, executed and delivered
by such Party and is its legal, valid and binding obligation
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, moratorium,
insolvency or other similar laws affecting creditors' rights
generally, or by general principles of equity;
(iv) its obligations hereunder shall be performed by personnel with
the requisite skill, training, experience and abilities to
perform such obligations hereunder in a diligent and
professional manner; and
(v) its performance hereunder shall not violate or be in conflict
with (a) its
27
governing documents, (b) any judgment, decree or order to which
it is a party, (c) any agreement, contract, understanding,
indenture or other instrument to which it is a party, or (d)
any applicable law, rule or regulation.
2. Additional Philips' Warranties.
------------------------------
2.1 Philips further warrants that:
(i) as of the date of this Agreement, it is not involved in any
litigation where a claim of patent, copyright or trade secret
infringement has been made against the Licensed Product; and
(ii) the Intellectual Property Department of Philips Electronics
North America Corporation is responsible for intellectual
property matters of Philips in the United States and that, as
of the date of this Agreement, the Intellectual Property
Department has not received any assertions, threats, or claims
from any third party that the Licensed Product infringes any IP
Rights of any third party.
3. Indemnification.
---------------
3.1 Philips Indemnification.
-----------------------
Subject to the provision set forth herein below, Philips shall defend,
at its expense, any action brought against MedQuist based on a claim
that the Licensed Product, when used in accordance with the terms of
this Agreement and for its intended use, infringes a United States
copyright or trademark, trade secrets, patents or other IP Rights,
provided Philips is notified promptly in writing by MedQuist of the
claim, is
28
given sole control of the defense and settlement for so long as it
diligently pursues such defense, and is provided all reasonable
assistance by MedQuist in connection therewith. Philips shall pay any
costs, settlements and damages finally awarded against MedQuist in
connection with the claims. If the Licensed Product is finally
adjudged to so infringe, or in Philips's opinion such a claim is
likely to succeed, Philips will, at its option: (i) procure for
MedQuist the right to continue using the Licensed Product in the USA;
(ii) modify or replace the infringing Licensed Product so there is no
infringement (provided the Licensed Product's performance is not
materially adversely affected thereby); or (iii) refund the license
fees thereof to MedQuist, less a reasonable allowance for
amortization, depreciation and use.
3.2 In the case of a third party claim of infringement asserted against a
Philips trademark, Philips may instruct MedQuist to use a different
trademark.
3.3 Philips will have no liability for any claim of infringement of any
third party IP Right that arises as a result of (i) MedQuist's use of
the Licensed Product as furnished by Philips with other software,
product or data if such claim would have been avoided by exclusive use
of the Licensed Product, (ii) modification of the Licensed Product as
furnished by Philips by anyone other than Philips if such claim would
have been avoided by use of the unmodified Licensed Product; (iii)
third party software or (iv) use of other than the most current
release of the Licensed Product as furnished by Philips if the claim
could have been avoided by the use of the most current release.
Licensing of the Licensed Products by Philips does not convey any
license, by implication, estoppel or otherwise, under patent claims
covering combinations of the Licensed Products with other devices or
elements.
3.4 THE FOREGOING STATES PHILIPS' ENTIRE LIABILITY TO MEDQUIST FOR
INFRINGEMENT OF COPYRIGHTS, PATENTS, OR OTHER
29
INTELLECTUAL PROPERTY RIGHTS. SUCH LIABILITY EXTENDS ONLY TO THE
ACTIVITIES OF MEDQUIST UNDER THIS AGREEMENT AND NOT TO (i) ANY USE OR
OTHER ACTIVITIES OF END USERS, CUSTOMERS OR OTHER THIRD PARTIES OR
(ii) LIABILITIES INCURRED BY MEDQUIST ARISING FROM ANY OTHER
ACTIVITIES OF END USERS, CUSTOMERS OR OTHER THIRD PARTIES. IN NO EVENT
SHALL PHILIPS' LIABILITY TO MEDQUIST EXCEED A SUM EQUAL TO THE TOTAL
LICENSE FEES PAID BY MEDQUIST TO PHILIPS HEREUNDER DURING A 12 MONTH
PERIOD IMMEDIATELY PROCEEDING THE DATE THAT PHILIPS IS NOTIFIED IN
WRITING BY MEDQUIST OF SUCH CLAIM. EXCEPT AS SPECIFICALLY PROVIDED
HEREIN, PHILIPS WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE OF WHATEVER
KIND (INCLUDING, IN PARTICULAR, ANY INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, LOSS OF TURNOVER OR PROFITS) SUFFERED BY
MEDQUIST OR ANY OTHER PERSON AS A RESULT OF THE INFRINGEMENT OF ANY
PATENT, COPYRIGHT, OR OTHER INTELLECTUAL PROPERTY RIGHT.
4.1 MedQuist agrees to indemnify, defend and hold harmless Philips against
any suit or proceeding brought against Philips incident to any
infringement or claimed infringement of any patent, copyright or other
intellectual property right arising out of (i) compliance with any
MedQuist furnished specification or designs; (ii) unauthorized
modification of the Licensed Product or any part thereof by MedQuist;
(iii) use of the Licensed Product by MedQuist in connection or
combination with software or hardware not provided by Philips under
this agreement, where the claim arises by the combination with the
other software or hardware with which the Licensed Product is
combined; (iv) the use of the Licensed Product by MedQuist in a
30
manner other than as recommended in the Documentation; or (v) the use
of any non-current release of the Licensed Product by MedQuist where
the current release avoids said infringement, and has been made
available to MedQuist along with written notice that the current
release avoids a potential issue of infringement. Subject to the
limitations contained in Section 4 of this Schedule C, MedQuist shall
pay all settlements and damages awarded as a final judgment by a court
of competent jurisdiction, provided MedQuist is promptly notified by
Philips in writing of any such claim and, at MedQuist's expense is
given full and exclusive control of said suit, and all reasonable
requested assistance from Philips.
4.2 THE FOREGOING STATES MEDQUIST'S ENTIRE LIABILITY TO PHILIPS FOR
INFRINGEMENT OF COPYRIGHTS, PATENTS OR OTHER PROPRIETARY RIGHTS. IN NO
EVENT WILL MEDQUIST'S LIABILITY TO PHILIPS EXCEED A SUM EQUAL TO THE
LICENSE FEES AND PURCHASE PRICES INVOICED TO MEDQUIST BY PHILIPS
HEREUNDER DURING A 12 MONTH PERIOD IMMEDIATELY PRECEDING THE DATE
MEDQUIST IS NOTIFIED IN WRITING BY PHILIPS OF SUCH A CLAIM . EXCEPT AS
SPECIFICALLY PROVIDED HEREIN, MEDQUIST WILL NOT BE LIABLE FOR ANY LOSS
OR DAMAGE OF WHATEVER KIND (INCLUDING, IN PARTICULAR, ANY INCIDENTAL,
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSS OF TURNOVER OR
PROFIT) SUFFERED BY PHILIPS OR ANY OTHER PERSON AS A RESULT OF THE
INFRINGEMENT OF ANY PATENT, COPYRIGHT, OR OTHER INTELLECTUAL PROPERTY
RIGHT.
5. Limited Product Warranty.
------------------------
31
5.1 Philips represents, undertakes and warrants to MedQuist that the
Licensed Product will perform substantially in conformance with the
documentation accompanying such Licensed Product for a period of
ninety (90) days from the date of shipment and acceptance of the
Licensed Product and documentation by MedQuist. Philips does not,
however, warrant that (a) the operation of such Licensed Product will
be uninterrupted or error free; (b) the Licensed Product meets certain
success rates or performance levels; nor (c) that the Licensed Product
will meet the requirements of MedQuist or any third party. If the
Licensed Product fails to perform substantially in conformance with
the documentation accompanying the Licensed Product during the
warranty period set forth herein, then Philips, upon receipt of
written complaint to that effect, will undertake all commercial
endeavors to correct that non-conformity in accordance with good
software engineering practices, or, if unable to do so, will replace
the nonconforming Licensed Product with a functionally equivalent
Licensed Product.
5.2 In order to obtain service under the terms of the warranty provided in
Section 5.1 hereof, before the expiration of the appropriate warranty
period, MedQuist must notify Philips in writing of the defective or
non-conforming item. Philips reserves the right to charge MedQuist for
any and all costs incurred by Philips in connection with allegedly
defective warranty claims hereunder that Philips reasonably determines
not to be non-conforming or defective as described above and under
such circumstances MedQuist will pay Philips such costs promptly after
its receipt of an invoice therefor.
5.3 The warranty provided in Section 5.1 hereof shall not apply if failure
of the Licensed Product covered by such warranty to perform
substantially in conformance with the documentation accompanying the
Licensed Product has resulted from accident, abuse, modification,
misapplication, improper use or faulty equipment.
32
5.4 EXCEPT FOR THE LIMITED WARRANTY SPECIFIED IN 5.1 THROUGH 5.3 HEREOF,
THE LICENSED PRODUCT AND SERVICES ARE PROVIDED "AS IS". FURTHERMORE,
THE WARRANTIES AND REMEDIES PROVIDED BY SECTIONS 5.1 THROUGH 5.3 ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED, AND
PHILIPS MAKES NO OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED, ORAL
OR WRITTEN. IN ADDITION PHILIPS DISCLAIMS ANY IMPLIED WARRANTIES OF
INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
PHILIPS SHALL NOT BE LIABLE FOR ANY INCIDENTAL, SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF
ANTICIPATED PROFITS OR BENEFITS. NO PHILIPS AUTHORIZED REPRESENTATIVE,
AGENT OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATIONS, EXTENSION
OR ADDITION TO THE WARRANTIES PROVIDED IN SECTIONS 5.1 THROUGH 5.3.
PHILIPS MAKES NO WARRANTY AS TO (A) DEFECTS IN LICENSED PRODUCT OTHER
THAN THOSE WHICH MATERIALLY AFFECT PERFORMANCE IN ACCORDANCE WITH THE
APPLICABLE PRINTED PRODUCT DOCUMENTATION MENTIONED ABOVE, AND (B) AS
TO DEFECTS THAT APPEAR IN THE LICENSED PRODUCT USED IN VIOLATION OF
THE LICENSE GRANTED HEREIN.
33
SCHEDULE "D"
Pricing and Fees
Initial Sign-up fee (15 man years, as described hereinafter)
15 x 150k US$ = 2.25 M US$
payable: 500k$ on 20 September 2000
500k$ on 20 December 2000
500k$ on 20 March 2001
250k$ on 20 June 2001
250k$ on 20 September 2001
250k$ on 20 December 2001
2/nd/ and 3/rd/ level Support
2000: 0
2001: 1 person at 200k US$ / year
2002: 2 persons at 400k US$ / year
2003 (and onwards)-3 persons at 600k US$ / year
Support payable per Quarter, no later than by the middle of the second
month
License Fees
License Fees are based on a per use basis following the formula below.
Note:
PAYROLL lines are the lines that serve as basis to pay the transcriptionists
(Payroll-Line is 65 black/white characters)
34
- -----------------------------------------------------------------------------------------------------------------------------
Year Year 2001 Year 2002 Year 2003 Year 2004 Year 2005
2000 and beyond
- -----------------------------------------------------------------------------------------------------------------------------
Estimated
Penetration of SR
applied as a
percentage of 0% 4 % 13 % 25 % 45 %
Pay-roll lines (A)
- -----------------------------------------------------------------------------------------------------------------------------
Cost per Pay-roll
line via Speech * 500 Million Payroll Lines via Speech Recognition in a year at 0,012 US$ per Line
Recognition from (a new count starts each year as from Jan. 1st)
MedQuist to PSP
(equals revenue to
PSP) and for each Payroll Line via Speech Recognition in such year ** 500 Million Lines at 0,010 US$ per Line
- -----------------------------------------------------------------------------------------------------------------------------
Guaranteed License 0% 75% of Estimated 75% of Estimated 50% of Estimated 25% of Estimated No Guarantee.
fees Penetration (A) Penetration (A) Penetration (A) Penetration (A)
x Total Volume x Total Volume x Total Volume x Total Volume License fee
in Pay-roll in Pay-roll in Pay-roll in Pay-roll is based on
lines (both via lines (both via lines (both via lines (both via ACTUAL
Speech Speech Speech Speech Pay-roll
Recognition and Recognition and Recognition and Recognition and LINES via
directly to directly to directly to directly to Speech
transcriptionist) transcriptionist) transcriptionist) transcriptionist) Recognition
in Year 2001 x in Year 2002 x in Year 2003 x in Year 2004 x x Cost per line
Cost per line Cost per line Cost per line Cost per line formula (B)
formula (B) formula (B) formula (B) formula (B)
- -----------------------------------------------------------------------------------------------------------------------------
* less than
** more than
Payable in advance per Q based on estimations
ALL CHARGES FOR ADDITIONAL SERVICES ( e.g. development, consultancy, training
etc) will be on commercial Terms &Conditions to be negotiated in good faith
15 Man years of pre-committed payment at Philips' internal, fully loaded cost
basis.
35
This payment is for three kind of services:
1) Development / Project Management / Consultancy for a MedQuist optimized
-----------------------------------------------------------------------
Correction Editor.
------------------
The current Correction Editor of Philips has been developed for European
circumstances and may well need to be adapted to the speed and customs
(habits) of MedQuist transcriptionists who are used to using short-hand
codes. (E.g. 1) if stopped at a mis-recognized word by just typing over this
word, the original word disappears, preventing the correctionist from first
having to delete this word, or 2) if stopped at a certain word and a period
is pressed on the keyboard then this period will follow this word and the
next word will be capitalized; etc.).
Philips will be actively involved in the design and specification phase, and
undertake the development and testing of the modifications.
The jointly to be agreed specifications will serve as the input for the
jointly to be agreed project plan. In the project plan also the acceptance
criteria must be defined.
No later than June 2000 Josef Reisinger, product manager Professional
Dictation will come to MedQuist to start the Specification Process.
Philips will employ new and existing resources to this Project on a dedicated
basis.
2) Consultancy Development / Project Management / Consultancy for Integration of
-----------------------------------------------------------------------------
SR into MedQuist IT infrastructure.
----------------------------------
Although this activity is under responsibility of MedQuist, a close
(technical) co-operation is needed to make sure sound- and text-files are
flowing from one database to the other. Also some customizations/adaptations
are expected on the Speech Recognition system to accommodate the MedQuist
system.
No later than June 2000 , Dieter Hoi, Development Project Leader SpeechMagic
and Josef Reisinger will come to MedQuist to start planning the integration
process.
3) Start-up services.
------------------
In addition to the normal 2/nd/ and 3/rd/ line support Philips will provide
technical expertise on site during start-up time to minimize down-time risks.
The best person(s) for this will be identified later.
36
The 15 man-year is a minimum commitment to Philips to be invoked before December
2001. The commitment is on so called fully loaded cost basis. When resources are
needed after or in addition to the 15 man-years having been spent (a monthly
report on spent time will be provided to MedQuist) or after December 2001,
whichever comes first, the cost for these additional services will be on
Commercial Terms and Conditions to be negotiated.
37
Schedule E
SUPPORT
1. Philips offers to MedQuist Support as described in this Schedule E. Philips
agrees to make available Support for a period of one year from the date of
discontinuation of a certain release of the Licensed Product. In case
Philips opts not to continue offering such Support services, MedQuist will
receive access to the source code for internal error correction purposes.
Support shall include the following:
(a) Supply of routine Patches, Maintenance Releases and Documentation
updates and - corrections;
(b) Problem diagnosis and resolution including Level 2 and Level 3
Support.
2. MedQuist can only obtain Support services by payment of a quarterly fee
described in Schedule D.
3. If MedQuist has paid for Support services pursuant to Schedule D:
(a) Upon receiving notice from the appointed MedQuist internal Level 1
Support unit of a Problem, Philips shall verbally acknowledge receipt of
such notice, and confirm the same by fax or e-mail within 24 hours
thereafter. Such acknowledgment shall contain a unique number identifying
the particular problem for tracking purposes. Philips shall provide
MedQuist with a status of any Patch, bug or error logged for MedQuist
provided that MedQuist identifies the particular Problem by the tracking
number assigned to it by Philips. Each Problem logged for MedQuist shall
remain open until closure notification is agreed to by MedQuist.
38
(b) Philips shall provide prompt written notice to MedQuist of all
defects, malfunctions, Patches, bugs, viruses, and/or other anomalies in
the Licensed Products which become known to Philips, in case Philips
believes that such conditions are likely to result in actual or potential
degradation of the functionality or performance of the Licensed Products.
(c) Philips shall make all reasonable efforts to provide a Patch for the
Licensed Product(s) according to the following "restoration time" schedule:
(1) Severity 1 - within four (4) normal Business hours of receipt of
notice of existence of a Problem by the appointed MedQuist
internal Level 1 Support unit.
(2) Severity 2 - within one (1) business day of receipt of notice of
existence of Problem by the appointed MedQuist internal Level 1
Support unit.
(3) Severity 3 and Severity 4 - if not a Minor Release, within twenty
(20) working days of acknowledging the receipt of the Problem the
appointed MedQuist internal Level 1 Support unit and thereafter
in all other instances resolved in a Major Release of the
supported Licensed Product.
(d) In the event Philips does not respond to a verifiable MedQuist
reported Problem within the time schedule and guidelines, as provided for
in this Schedule E or if MedQuist in MedQuist's good faith determination,
believes the progress of Philips in attempting to resolve the Problem or in
responding to the information request is not being made in accordance with
Philips's Problem plan, then MedQuist may escalate the Problem to a higher
severity level.
39
5 Upon MedQuist's request and subject to availability, Philips shall furnish
qualified personnel for on-site assistance to MedQuist to resolve Problems.
In such event, MedQuist shall pay Philips at its then current time and
materials rates, which shall be consistent with customary and reasonable
industry rates therefor, for the time of such personnel and reimburse
Philips for reasonable travel and living expenses of such personnel
incurred in rendering such assistance.
6. Severity:
(a) "Severity 1" shall mean a Problem which critically impacts MedQuist's
ability to continue its business in the ordinary course.
(b) "Severity 2" shall mean a Problem where a major function of the
supported Licensed Product is unusable and significantly impacts MedQuist's
ability to do business but MedQuist's can continue to perform its business
as necessary.
(c) "Severity 3" shall mean a Problem which does not seriously impact
MedQuist's business.
(e) "Severity 4" shall mean a Problem not covered above, including
supported Licensed Product enhancement requests.
MedQuist will ensure that escalation to Level 2 Support is only being
received by Philips from the appointed MedQuist internal Level 1 Support
unit. Level 2 Support will only communicate to such appointed MedQuist
internal Level 1 Support unit.
40