MEDQUIST INC
EX-10.26.1
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<TYPE>EX-10.26.1
<SEQUENCE>35
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<DESCRIPTION>EX-10.26.1
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<p align="right" style="margin:0in 0in 12.0pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 10.26.1</font></b></p>

<p style="margin:0in 0in 12.0pt;page-break-after:avoid;text-align:center;text-transform:uppercase;"><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:none;">AMENDMENT NO. 1 TO LICENSING AGREEMENT</font></p>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Amendment No. 1 (&#147;Amendment No. 1&#148;) to Licensing
Agreement is made as of January 1, 2002 by and between MedQuist Inc. (&#147;MedQuist&#148;),
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 (&#147;Philips), an Austrian corporation, with its registered place
of business at Computerstrasse 6, 1101 Vienna, Austria (MedQuist and Philips,
each a &#147;Party&#148; and, collectively, the &#147;Parties&#148;).</font></p>

<p style="margin:0in 0in 12.0pt;page-break-after:avoid;text-align:center;text-transform:uppercase;"><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:none;">WITNESSETH</font></p>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Parties entered into a Licensing
Agreement, dated as of May 22, 2000 (the &#147;Original Licensing Agreement&#148;) relating
to the integration and use of certain Philips speech recognition technology
into MedQuist&#146;s business; and</font></p>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Parties desire to amend the Original
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. 1; and</font></p>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, simultaneously with, and as a condition to,
entering into this Amendment No. 1, the parties are entering into a Support
Agreement (the &#147;Support Agreement&#148;).</font></p>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOW, THEREFORE, in consideration of the mutual
promises contained herein, the Parties agree as follows:</font></p>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Section 1. -
Definitions.</font></h3>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Unless otherwise
defined in this Amendment No. 1, capitalized terms used in this Amendment No. 1
shall have the meanings given to them in the Original Licensing Agreement.</font></h4>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The following
definitions set forth in Section 1 of the Original Agreement are deleted: Level
2 Support and Level 3 Support.</font></h4>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The definition of
Licensed Product set forth in Section 1 of the Original Agreement is modified
by deleting &#147;and (ii)&#148; and inserting, &#147;(ii) the correction SDK and (iii)&#148;.</font></h4>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The following
definition shall be added to Section 1 of the Original Agreement: &#147;Service
Bureau Services&#148; shall mean the licensing of remote access to Licensee&#146;s
software and hardware dictation and transcription systems (e.g.,
SpeechMachines).</font></h4>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Section 2. - Scope
of License Grant, Ownership and Proprietary Rights.</font></h3>


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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The first paragraph
of Section 2.1 of the Original Licensing Agreement is deleted in its entirety
and replaced with the following:</font></h4>

<p style="margin:0in 0in 12.0pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Subject to the terms and conditions set forth in this
Agreement, Philips grants to MedQuist during the term of this Agreement: (i) a
personal, non-assignable, non-transferable, indivisible, non-exclusive (except
as provided herein) license, without right to sub-license, to use the Licensed
Product in Object Code and Documentation only (except as provided in Section 6)
for MedQuist&#146;s internal use at its sites anywhere in the world, solely in
connection with MedQuist&#146;s network and in connection with providing Services;
and (ii) a personal, non-assignable, non-transferable, indivisible,
non-exclusive (except as provided herein) license, without right to
sub-license, to use the Licensed Product in Object Code and Documentation only
(except as provided in Section 6) for use in connection with providing Service
Bureau Services anywhere in the world.</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The words &#147;in the USA&#148; in the first sentence of the
second paragraph of Section 2.1 of the Original Licensing Agreement are hereby
deleted and replaced with &#147;in North America. With respect to the Service Bureau
Services, Philips hereby grants to MedQuist a right of first refusal for any
sales opportunity that Philips has in North America to sell the Licensed
Product to a third party for Service Bureau Services.&#148;</font></p>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Section 4 -
Pricing.</font></h3>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The second sentence
of Section 4.1 of the Original Licensing Agreement is hereby deleted in its
entirety and replaced with the following:</font></h4>

<p style="margin:0in 0in 12.0pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">From and after January 1, 2002, the license fess for the
Licenses Product payable by MedQuist to Philips are set forth in Schedule D
(the &#147;Fees&#148;). &#147;Fees&#148;) attached to Amendment No. 1. All license fees prior to
January 1, 2002 shall be as set forth in Schedule D attached to the Original
Agreement.</font></p>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Upon execution of
this Agreement, MedQuist shall pay to Philips all amounts due and owing under
the Original License Agreement through December 31, 2001 (i.e., $US 716,000).</font></h4>

<h4 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Section 4.5 of the
Original Licensing Agreement is hereby deleted in its entirety.</font></h4>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Schedule C-
Warranties, Indemnification and Limitation on Liability Provisions. Any
reference to the United States, USA or similar shall be changed to North
America.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Schedule E -
Support. Schedule E (&#147;Support&#148;) of the Original Licensing Agreement is hereby
deleted in its entirety. Simultaneous with the execution of this Amendment No.
1, the Parties shall enter into an SLA Agreement in the form attached to this
Amendment No. 1.</font></h3>


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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Software Escrow. In
the event that: (i) Philips seeks to sell or transfer the Licensed Products to
a third party that is not a direct or indirect majority owned subsidiary of
Koninklijke Philips Electronics N.V. (an &#147;affiliate&#148;), or (ii) Philips seeks to
sell or otherwise transfer all or substantially all of its business or assets
to a non-affiliate or if beneficial ownership of a controlling interest in its
capital stock is to be sold or otherwise transferred to a non-affiliate, it
shall first give MedQuist at least 60 days prior written notice and the parties
shall enter into a software escrow agreement and place the Licensed Products in
escrow on commercially reasonable terms prior to completing any such sale or
transfer. MedQuist shall be responsible for the fees to the escrow agent.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; HIPPA Business
Associate. At the request of MedQuist, Philips shall execute a business
associate, chain of trust and other confidentiality agreement to the extent
reasonably required under the terms of the Health Insurance Portability and
Accountability Act of 1996 (&#147;HIPAA&#148;). Notwithstanding the foregoing, Philips
shall not be responsible for MedQuist&#146;s failure to comply with HIPAA as a
result of the manner in which MedQuist uses the Licensed Product.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Miscellaneous. The
Original Licensing Agreement shall continue in full force and effect, except
for the amendments set forth in this Amendment No. 1.&#160; Reference to the Agreement in the Original
Licensing Agreement shall mean the Original Licensing Agreement as amended
hereby. In the event of any inconsistency or conflict between this Amendment
No. 1 and the Original Agreement, the provisions of this Amendment No. 1 shall
govern and control. This Amendment No. 1 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.</font></h3>

<p style="margin:0in 0in 12.0pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be duly executed by their authorized representatives.</font></p>

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  <p style="font-size:10.0pt;margin:0in 0in .0001pt;"><!-- SET mrlNoTableShading -->PHILIPS SPEECH PROCESSING
  GmbH</p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MedQuist Inc.</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Tom Stock</font></p>
  </td>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ David A. Cohen</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name: Tom Stock</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name: David A. Cohen</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title: General
  Manager</font></p>
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  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title: Chairman &amp; CEO</font></p>
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<p style="margin:0pt 0pt 12.0pt;page-break-after:avoid;text-align:center;text-transform:uppercase;"><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:none;">SCHEDULE &#147;D &#147;</font></p>

<p style="margin:0pt 0pt 12.0pt;page-break-after:avoid;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pricing and Fees</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">From and after January 1, 2002, License fees shall be
based on a per payroll line basis. A payroll line is 65 black/white characters.
MedQuist shall pay $US .024 per payroll line for the first 500 million payroll
lines per calendar year and $US .01 per payroll line for all lines in excess of
500 million in that calendar year. MedQuist shall only be charged for lines
produced using the Licensed Product that are used to produce a final report
billable by MedQuist to its client (e.g., MedQuist will not be charged for
testing and developing the Licensed Products or adapting a system to a
dictator). If MedQuist sends a report to a Medical Editor along with text
produced by SpeechMagic and the Medical Editor deletes this text before producing
a final report billable by MedQuist, MedQuist must still pay the License fees
to PSP.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MedQuist shall pay a one time licensing fee of $US
150,000 for unlimited seat licenses for its use of the Correction SDK, which
shall be due upon execution of Amendment No. 1. After the termination of the
Agreement: (i) MedQuist and its end users of the software may continue to use
installed copies of the Correction SDK software; (ii) PSP shall no longer be
obligated to support the Correction SDK software unless the parties mutually
agree upon the terms and conditions of a new support agreement and (iii)
MedQuist may not install any new copies of the Correction SDK software unless
the parties mutually agree upon the terms and conditions of a new licensing
agreement for such additional installations.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ALL CHARGES FOR ADDITIONAL SERVICES shall be on
commercial terms and conditions that are reasonably acceptable to both parties.</font></p>

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